Allowance and Deduction Codes
The allowance / Deduction codes tab is a vital component of the payroll system. This where the behavior of each allowance and deduction is coded. 8 default allowances, 8 deductions and 8 external payments can be added.
Use the Filter function to show only Allowance, Deduction or Benefit in Kind items. On clicking the radio button, the list will be filtered based on the choice.
In the highlighted example, “Travelling Allowance” is part of gross salary and PCB Calculations but does not attract EPF and SOCSO. The PCB limit figure of 6,000 signifies that the first 6,000 is exempted from PCB calculations.
EA Other is ticked to show this amount will displayed on the other allowances category in the EA form.
Ad Hoc Commission
Gross / EPF / SOCSO / PCB ticked.
- Gross : Amount will be added to gross salary / income.
- EPF : EPF will be deducted.
- SOCSO : SOCSO will be deducted.
- PCB : This amount will attract PCB.
Gross / Fixed / EPF / SOCSO / PCB ticked.
The difference between “Ad Hoc Commission” and “Commission” is the Fixed category. Under current PCB calculation rules, any payment that is paid regularly is considered as part of “Current Months Remuneration” and “Current Months Additional Remuneration”. In calculating PCB, items with fixed will be calculated together with the Basic Salary. Items without “Fixed” will be calculated separately.
Although both items attract PCB the final PCB value will be different. Items not part of “Fixed” will have lower tax, because it is not considered to be part of recurring monthly income. Generally most allowances fall into the “Fixed” category.
This is for special cases where PCB is not paid up to a certain point. This is the case of “Travelling Allowance” as shown in the earlier table. There is a PCB limit of RM 6,000. That means the initial YTD accumulated amount up to 6,000 is exempt from tax computation. There are a few other items that fall under this category. Also note that the EPF and SOCSO boxes are also not ticked. This is because “travelling allowance” is also exempted from EPF and SOCSO calculations.
Note the case of “Directors Fees” and “Gratuity” that attract PCB, but not EPF and SOCSO.
The function of the software is to calculate allowances based on the choices made in this table. All PCB calculations made by this software will give exactly the same result as that found using LHDN’s Online PCB calculator. It is the responsibility of the user to make the right choices.
CP38 – None of the boxes are checked!
This is because the amount paid for CP38 does not effect your gross income. Similarly the total amount used for calculating EPF, SOCSO and PCB will not be reduced. Although this amount will not be deducted from the Gross Salary or Net Salary, it will be deducted from the “End Month Pay”. Same with “Loan Repayment”.
On the other hand there can be cases like “Deduction” where an amount deducted for being Absent or not turning up for work will be deducted from the total used to calculate EPF, SOCSO and PCB and also Gross.
Zakat – Special Case
Zakat is a special case where the amount is directly subtracted from the PCB amount. In the case of the Zakat amount higher than the PCB amount, the Zakat balance will be carried forward to the next month.
Benefit in Kind
Benefit in Kind are items that do not appear in the payslip and are not part of gross salary.
Generally, BIK items require “Fixed” to be checked. The basic effect of “Fixed” similar to PCB is whether the amount is calculated as regular or as additional income. To be on the safe side, all BIK items can be set as “Fixed”.
This screen is also used to create benefits that are paid external to the monthly gross salary. In other words benefits in kind or in cash that are paid separately and are not part of the monthly gross salary.