PCB (Potongan Cukai Bulanan) is the monthly income tax deduction from your salary that employers are legally required to remit to LHDN. Most Malaysian employees see PCB deducted from their payslips without fully understanding how it is calculated or how to reduce it. Here is a complete explainer.
How PCB Is Calculated
Your employer uses LHDN's PCB tables (or e-PCB software) to calculate monthly deductions based on: gross monthly salary, employee's marital status and number of dependants (declared on Form TP1), and approved reliefs notified to employer. The PCB system aims to have deductions match the actual annual tax liability.
Reducing Your PCB with Form TP1
Form TP1 allows employees to declare reliefs to their employer to reduce monthly PCB. Submit a completed TP1 to HR/payroll at the start of the year or when circumstances change (new child, new insurance policy). Include: EPF additional voluntary contributions, life insurance premiums, children's reliefs, medical insurance. This reduces PCB immediately, improving monthly cash flow.
Form TP3: Declaring Other Income
If you have rental income, freelance income, or investment income, declare this on Form TP3. Your employer adjusts PCB upward to account for the additional income. Failing to declare additional income can result in underpayment and penalties when you file.
CP38: Additional PCB
If you underpaid tax in a previous year, LHDN issues a CP38 order requiring additional monthly PCB deductions from your salary. Your employer is legally required to comply. The additional deduction continues until the arrears are cleared.
PCB vs MTD: Same Thing
PCB and MTD (Monthly Tax Deduction) are the same system โ PCB is the Malay abbreviation, MTD the English. Both refer to the employer withholding scheme under Section 107C of the Income Tax Act 1967.