PCB (MTD) — the monthly deduction
Potongan Cukai Bulanan (PCB), or Monthly Tax Deduction (MTD), is a payroll mechanism for collecting estimated income tax during the year. Your employer deducts it monthly and remits it to LHDN. The amount can depend on taxable remuneration, the month, residency status, family information, allowable reliefs and earlier income or tax already deducted — which is why two people with the same basic salary may have different PCB. Monthly Tax Deduction is based on the relevant computerised calculation rules, including annualised income, qualifying deductions, prior payments and other permitted adjustments.
Income tax — the final assessment
Annual income tax is the final assessment for the year. It is computed from the resident individual schedule for Year of Assessment (YA) 2026 on your chargeable income — annual employment income less EPF relief capped at RM4,000, less individual relief of RM9,000 and any other claimed reliefs — less rebates and zakat. You settle it by filing your annual return (Form BE for employment income) through e-Filing. Your EA statement gives you the figures for the return: gross employment income, employee EPF contributions, PCB already deducted and remitted, and zakat paid through salary deductions.
PCB is a prepayment, not a separate tax
PCB is a credit against your final tax, not your final tax itself. If the PCB deducted across the year is more than your final tax after all reliefs, the excess comes back as a refund at filing. If it is less, you pay the difference when you file. PCB paid is only treated as final tax when all the final-tax conditions are met, including the same employer for the full calendar year under the 1994 Rules — so in most cases, filing still matters even when PCB was deducted every month. If you do not file when required, PCB is not automatically your final tax.
How TP1 and TP3 fit in
Form TP1 is the monthly route: you declare tax reliefs and rebates to your employer, and your employer uses them to adjust your monthly PCB from the month the form is processed, spread over the remaining months. Form TP3 is the change-of-employer route: it reports previous employers’ income, EPF, PCB and reliefs when you change jobs in the same year, so the new employer can determine the monthly deduction accurately. TP1 declares reliefs and rebates; TP3 carries prior-employment records. Both go to your employer, not to LHDN — LHDN receives your annual return, not your TP1 or TP3.
Worked comparison — same person, two views
The same salary gives one annual tax figure and one monthly PCB figure. These are simplified annual illustrations (annual gross less EPF relief capped at RM4,000 and individual relief of RM9,000, then the YA2026 schedule, then ÷ 12), for a single resident employee with a fixed salary, no TP1 reliefs, no spouse or child reliefs, no zakat and no bonus.
| Monthly salary (RM) | Annual gross (RM) | Chargeable income (RM) | Annual income tax (RM) | Monthly PCB, annualised (RM) |
|---|---|---|---|---|
| 5,000 | 60,000 | 47,000 | 1,320 | 110.00 |
| 8,000 | 96,000 | 83,000 | 6,170 | 514.20 |
On the RM5,000 profile, tax on RM47,000 is RM600 (tax up to RM35,000) + 6% × (47,000 − 35,000) = 600 + 720 = RM1,320 a year. On the RM8,000 profile, tax on RM83,000 is RM3,700 (tax up to RM70,000) plus 19% × RM13,000 = RM2,470, giving RM6,170 a year. The monthly PCB figures are the annual tax spread across 12 months; the real monthly formula can differ month to month.
Common mix-ups
- Treating PCB as a separate tax. It is an instalment of your income tax, collected monthly.
- Treating PCB as EPF, SOCSO or EIS. Those are four different deductions with four different purposes — PCB is income tax, EPF is retirement savings, SOCSO is social security and EIS is employment insurance.
- Assuming TP1 replaces filing. TP1 only adjusts the monthly estimate; you must still claim the same reliefs on your annual return.
- Assuming the annualised ÷ 12 figure is the payslip figure. The computerised monthly formula depends on the month, PCB already paid and remaining months.
FAQ — PCB vs Income Tax in Malaysia
Q: Is PCB a different tax from income tax?
A: No. PCB (MTD) is your income tax, collected monthly by your employer during the year. The annual income tax is the final assessment of the same tax, settled when you file.
Q: If PCB was deducted every month, do I still need to file?
A: Yes, where required. PCB paid is only treated as final tax when all the final-tax conditions are met, including the same employer for the full calendar year under the 1994 Rules. Otherwise you must still file and claim the same reliefs there.
Q: What happens if too much PCB was deducted?
A: Any overpaid PCB comes back as a refund at filing, if your total PCB for the year exceeds your final tax after all reliefs.
Q: What happens if too little PCB was deducted?
A: You pay the difference when you file. That is why TP1 reliefs and bonuses matter during the year — they change the monthly figure before filing settles the total.
Q: Does TP1 change my final tax?
A: No. TP1 only adjusts your monthly PCB from the month it is processed. You must still claim the same reliefs on your annual return, where the whole year is reconciled.
Q: I changed jobs this year — which form do I use?
A: TP3 for your prior-employment records: previous income, EPF, PCB and reliefs, so the new employer can calculate PCB accurately. TP1 is for declaring reliefs and rebates, not for prior-employment records.
Sources: LHDN resident individual tax schedule, YA2026 (see the PCB tax bracket table 2026); tax relief 2026 (RM8,000 worked example); TP1 guide and TP3 guide. This guide is an independent estimate aid, not an official LHDN publication and not tax advice. Figures are estimates for standard cases. Check your figure with LHDN’s official calculator (calcpcbplus.hasil.gov.my) and your payslip.
Primary official source / Sumber rasmi / 官方来源
Related tools and guides
PCB tax bracket table 2026 · Tax relief 2026 · TP1 guide · TP3 guide · PCB vs EPF vs SOCSO vs EIS · PCBCalc.my PCB estimator