What is PCB (Potongan Cukai Bulanan/Monthly Tax Deduction) in Malaysia?

PCB is a statutory system of monthly tax withholdings applied directly to an employee's taxable salary by their employer. The employer is legally obligated to calculate, deduct, and remit these tax payments directly to the Lembaga Hasil Dalam Negeri (LHDN or Inland Revenue Board of Malaysia) on behalf of the employee every single month. By deducting smaller amounts sequentially across 12 calendar months, PCB prevents workers from experiencing sudden financial distress when paying their annual personal income tax.

The primary purpose of PCB is to distribute your annual tax liability evenly throughout the calendar year of assessment. Instead of paying a massive lumpsum tax invoice when filing your taxes in April, PCB functions as structured advancement tax payments. By the time you file your annual tax returns, your accumulated monthly PCB payments should ideally equal or exceed your total annual income tax liability. If your PCB deductions end up being higher than your final tax liability, LHDN will process a refund directly to your registered bank account.

Employers are required to process PCB calculations using officially approved methods, most notably the LHDN Computerised Calculation Method (Kalkulator e-PCB/CP39). This formula takes into account your monthly gross salary, compulsory social security deductions (like EPF up to RM4,000 relief cap), marital status, spouse's employment, and any eligible children. Employers must submit these deductions to LHDN by the 15th day of the subsequent calendar month.