PCB/MTD Tax Deduction Guide: Everything You Need to Know 2025

PCB (Potongan Cukai Bulanan) or Monthly Tax Deduction is the income tax your employer deducts from your salary each month. This comprehensive guide explains how PCB works, how it's calculated, and strategies to optimize your monthly take-home pay.

What is PCB/MTD?

PCB (Potongan Cukai Bulanan) or MTD (Monthly Tax Deduction) is a prepayment of your annual income tax. Instead of paying a lump sum when you file your tax return, your employer deducts tax from your salary every month and remits it to LHDN (Lembaga Hasil Dalam Negeri) on your behalf.

How PCB is Calculated

Your employer calculates your PCB using the Computerized Calculation Method (CCM) based on:

1. Your Monthly Remuneration

This includes:

• Basic salary
• Fixed allowances (transport, meal, housing)
• Overtime pay
• Commissions
• Bonuses (prorated over 12 months)

2. Statutory Deductions

Automatic deductions that reduce your taxable income:

• EPF contributions: 11% of your salary
• SOCSO contributions: Fixed amounts based on salary bracket
• EIS contributions: 0.2% of salary (capped at RM4,000)

3. Tax Reliefs (via CP22/CP22A Form)

If you submit form CP22 (employees) or CP22A (directors) to your employer, these reliefs are factored in:

• Personal relief: RM9,000
• Spouse relief: RM4,000 (if applicable)
• Child relief: RM2,000 per child
• Life insurance: Up to RM3,000
• Medical expenses: Up to RM8,000 (parents)
• Education: Up to RM7,000

PCB Calculation Examples

Example 1: RM5,000 Monthly Salary

Example 2: RM10,000 Monthly Salary

PCB by Salary Level: Quick Reference

Approximate monthly PCB for different salary levels (assuming standard reliefs):

* Assumes RM12,000 in tax reliefs. Actual PCB may vary based on individual circumstances.

How to Reduce Your Monthly PCB

1. Submit CP22/CP22A Form

The most effective way to reduce PCB is to declare your expected tax reliefs:

• CP22: For employees
• CP22A: For company directors
• When: Submit at the start of the year or when circumstances change
• Effect: Employer recalculates PCB based on your reliefs

2. Maximize EPF Contributions

EPF contributions automatically reduce your taxable income:

• Mandatory 11% is already deducted
• Consider voluntary contributions for additional tax relief (up to RM4,000)
• Reduces both PCB and annual tax

3. Plan Your Bonuses

Bonuses can significantly increase your PCB:

• PCB on bonuses is calculated using the bonus month method
• Large bonuses may push you into higher tax brackets temporarily
• Consider spreading bonuses across months if possible

PCB vs Annual Tax Return

Frequently Asked Questions

What is PCB in Malaysia?

PCB (Potongan Cukai Bulanan) or Monthly Tax Deduction is the income tax your employer deducts from your salary each month and remits to LHDN. It's a prepayment of your annual income tax, calculated based on your monthly salary, EPF/SOCSO/EIS deductions, and expected tax reliefs.

Why is my PCB so high?

High PCB usually means: (1) You haven't submitted CP22 form to claim tax reliefs, (2) Your salary is high, (3) You received a large bonus that month, or (4) Your employer is using conservative estimates. Submit CP22 with your expected reliefs to reduce monthly PCB.

Can I get a refund if I overpay PCB?

Yes! When you file your annual tax return (Form BE), if your total PCB paid exceeds your actual tax liability, LHDN will refund the difference to your bank account. Refunds typically take 30-90 days after filing.

Do I still need to file tax return if PCB is deducted?

Yes, you must file an annual tax return even if PCB is deducted monthly. PCB is just an estimate. Filing your tax return allows you to claim all eligible reliefs, declare other income, and get a refund if you overpaid. Deadline is April 30 (manual) or May 15 (e-filing).

How do I reduce my PCB deduction?

Submit form CP22 (employees) or CP22A (directors) to your employer declaring your expected tax reliefs for the year. Include personal relief, spouse relief, child relief, EPF contributions, insurance premiums, medical expenses, and education costs. Your employer will recalculate your PCB based on these reliefs.

What happens if my PCB is too low?

If your PCB deductions are insufficient, you'll need to pay the balance when filing your tax return. LHDN may also impose penalties (10% increase) and interest for underpayment. To avoid this, don't over-claim reliefs on your CP22 form.

Is PCB calculated on gross or net salary?

PCB is calculated on your gross salary minus statutory deductions (EPF, SOCSO, EIS) and tax reliefs (if you submitted CP22). For example, RM5,000 gross becomes ~RM4,415 after EPF/SOCSO/EIS, then tax reliefs are applied before calculating PCB.

How is PCB calculated on bonuses?

Bonuses are added to your regular salary for that month, and PCB is calculated using the "bonus month" method. This may result in higher PCB for that month because the system projects this as your regular income. However, you'll get a refund when filing your annual return if you overpaid.

Related Articles

Conclusion

Understanding PCB/MTD is crucial for managing your monthly cash flow and tax planning. While PCB reduces your monthly take-home pay, it's simply a prepayment of your annual tax liability—not an additional tax.

Key takeaways:

• PCB is an estimate of your annual tax, paid monthly
• Calculated based on salary, EPF/SOCSO/EIS deductions, and tax reliefs
• Submit CP22 form to reduce monthly PCB by claiming reliefs
• You'll get a refund if you overpay when filing annual return
• Don't over-claim reliefs to avoid penalties
• Must still file annual tax return even with PCB deductions

Use our calculator to see exactly how PCB affects your monthly take-home salary along with EPF, SOCSO, and EIS deductions!