The PCB for Bonus calculation was one of the most difficult part of writing the Actpay. We recommend using a software as everything is fast and easy as all the PCB Bonus calculations are automatic.
This article shows in detail, step by step how to do the PCB Bonus calculation without using a software or the Online PCB calculator.
We have a lot of traffic for this post as manual bonus calculation is quite complicated. We have designed an Excel sheet for Bonus PCB calculation to make the calculations easier. Please read Manual PCB calculation Variation 1 below first before using it.
Bonus PCB Calculation Issues
In our our research on PCB calculation for Bonus using the MTD schedule, we found conflicting explanations online on how to calculate PCB Bonus. Over the years, the rules for calculating additional income has also changed. Most of the examples available are actually out of date.
Taking into account how the MTD Schedule is derived and the difference results between manual and computerized income tax calculations we have come up with 3 methods for calculating PCB Bonus. Below we provide a detailed explanation on the reason for the differing results.
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Bonus PCB Calculation Explanation
Calculating PCB for bonus and additional income is requires some complex calculations. Below we will try to give a simple and step by step explanation that hopefully everyone is able to understand.
This calculation method for bonus applies to all Additional income including adhoc commission or other income defined as Additional Remuneration. All the 3 methods shown below will give valid results, although the answer will differ slightly for each method.
The basic principle of PCB calculation is to extrapolate the monthly wage over 12 months to arrive at the best possible estimate of the the annual wage.
Both the computerized and manual calculations are geared towards a best guess of what the total wage will be at the end of the year.
Calculating PCB using the MTD Schedule provided by LHDN is based on the principal of taking each months wages in isolation. Therefore accumulated (YTD) wages and PCB do not come into play. In computerized PCB calculations, the actual Year to Date amounts are used to give a more accurate computation of PCB.
If you have any queries, please leave a comment below.
Method 1 – Manual PCB calculation for Bonus using PCB Schedule
This is the example is based on the most common example of PCB calculation for bonus found online. It is similar to the example found on the LHDN examples for 2008 bonus calculations, found at LHDN website
For these examples, we have made some changes to make it easier to follow.
Employee details :
- Employee Married, Spouse is working with 2 children below 18
- Monthly salary of RM5,000
- Bonus of RM10,000
CATEGORY 3 (KA2)
BASIC SALARY | 5,000.00 |
---|---|
EPF = 550.00 | |
Maximum allowed EPF deduction per month for 2020 is RM333 (2020 rules : Max EPF deduction per annum RM4000 / 12) |
(333.00) |
Taxable Income | 4,667.00 |
PCB 4,666 to 4,670 from table (KA2) |
76.95 |
Bonus | 10,000.00 |
EPF | 1,100.00 |
Maximum allowed EPF deduction per month for 2020 is RM333 EPF allowance already exceeded. Balance deduction is zero. |
0.00 |
Taxable Bonus Income (10,000 – 0) | 10,000.00 |
Monthly estimated salary with bonus | |
Basic + (Taxable Bonus)/12 months | |
4,667.00 + (10,000 / 12) = 4667 + 833.33 | 5,500.33 |
PCB for 4,496 to 5,500 from table (KA2) |
143.35 |
Tax difference between Income with Bonus minus Income without bonus | |
Total PCB – Basic PCB (143.35 – 76.95) | 66.40 |
PCB for Bonus = Extra PCB x 12 (66.40 x 12) | 796.80 |
Total PCB for month = Bonus PCB + Basic PCB (796.80+76.85) | 873.75 |
Method 2 – Manual PCB calculation for Bonus using PCB Formula
Step 1 – PCB for Basic Pay using Formula
Taxable Amount for current month = RM5,000–RM333.33 = RM4,667.00
Step 2 – Use formula to calculate P for Basic Pay
P = [(Y – K) x 12] + [Σ(Yt1 – Kt1)] + (Yt – Kt) – (D + S + QC)
Y = Basic Income and K = EPF deducted for basic income.
Yt1 and Kt1 are not applicable as accumulated (YTD) values are not used in manual calculations.
Yt = additional income and Kt = EPF deducted for additional income.
Y = 5,000
K = 333.33 (5,000 / 12) – Limit per annum for EPF deduction is 4,000. It used to be 6,000 in previous years )
Yt = 10,000
Kt = 0, since maximum EPF of 333.33 already deducted.
D = personal deduction = 9,000
S = spouse deduction = 4,000 for spouse not working
Q = No. of children, C = deduction per child = 2,000.
P = [(Y – K) x 12] + [Σ(Yt1 – Kt1)] + (Yt – Kt) – (D + S + QC)
= [(RM5,000–RM333.33) x 12] + [RM0.00 – RM0.00] +[RM0 – RM0]
– [RM9,000 + RM4,000 + RM4,000]
= RM56,000.04 + RM0 + RM0 – RM17,000
= RM39,000.04
(D = personal deduction 9000, S = 4,000, spouse, C = No. of Children = 2 x 2000)
Step 3 – Calculate Total Tax for Basic Pay
Total tax for a year = [(P – M) R + B]
= [(RM39,000.04 – RM35,000) x 8% + RM600]
= RM4,000.04 x 8% + RM600
= RM320.00 + RM600
= RM920.00
P, M, R and B are derived from the Income tax table, based on P = (35,000 – 50,000)
PCB for Current month = 920.00 / 12 = 76.66 = 76.70
Step 4 – Calculate Total Tax for Basic Pay + Bonus
P = [(Y – K) x 12] + [Σ(Yt1 – Kt1)] + (Yt – Kt) – (D + S + QC)
= [(RM5,000–RM333.33) x 12] + [RM0.00 – RM0.00] +[RM10,000 – RM0]
– [RM9,000 + RM4,000 + RM4,000]
= RM66,000.04 + RM0 + RM0 – RM17,000
= RM49,000.04
(D = personal deduction 9000, S = 4,000, spouse, C = No. of Children = 2 x 2000)
Step 5 – Calculate Total Tax for Basic Pay + Bonus
Total tax for a year = [(P – M) R + B]
= [(RM49,000.04 – RM35,000) x 8% + RM600]
= RM14,000.04 x 8% + RM600
= RM1,120.00 + RM600
= RM1,720.00
Step 4 – PCB for Bonus ( Additional Remuneration )
Annual (PCB for Basic + Bonus – PCB for Basic)
Bonus PCB = RM1,720.00 – RM920.00 = RM 800.00
Step 5 – Total PCB for current month
= RM76.70 + RM 800.00
= RM876.70
Method 3 Bonus PCB Calculation using Online LHDN PCB Calculator
There are 2 options in using the online PCB calculator:
- PREVIOUSLY EMPLOYED IN CURRENT YEAR
- PREVIOUSLY NOT EMPLOYED IN CURRENT YEAR
If you are using MTD schedule for your monthly PCB calculations, use “PREVIOUSLY NOT EMPLOYED IN CURRENT YEAR”. There are 2 reasons for this.
- You do not have to enter Y-T-D information
- This will simulate the MTD Schedule values, because it does not take into account Y-T-D information.
Basic : 5,000, EPF = 550 ( You can insert the actual EPF as long as the total EPF is below 4,000. The online calculator will automatically calculate the real values)
Bonus : 10,000, EPF = 1,100 ( You can insert the actual EPF as long as the total EPF is below 4,000. The online calculator will automatically calculate the real values)
Using the Online PCB Calculator the total PCB for the month = 876.75
The MTD of bonus (additional income) = 800.08 => 800.10
Basic PCB = RM76.66,
Variations between the 3 Methods
Basic PCB | Bonus PCB | Basic + Bonus PCB | |
PCB Schedule | 76.95 | 796.80 | 873.75 |
Direct Calculations | 76.70 | 800.00 | 876.70 |
Using Online Calculator | 76.66 | 800.08 | 876.65 |
Discrepancy between calculations using the 3 methods.
As can be seen the discrepancy between the calculations is very minor. The PCB Schedule based calculation has a larger variation of almost RM4 due to rounding used in creating the PCB Table.
If this is still too difficult, you can download our free Trial version of Actpay which can be run for 40 days. Enough to do Bonus calculations for January and February 2019.
Conclusion
In conclusion, it has to be noted that there are multiple ways to calculate PCB and some of the methods can be quite tedious. Considering the work involved and the high chance of errors in the calculation, it is recommended that the calculations be done very carefully. To avoid errors it is recommended that a payroll software be used.
The most common mistake in bonus calculations is the not including the basic salary and monthly allowances while calculating bonus. The bonus PCB is the PCB on the amount additional to the monthly gross income.
Although we have tried to make the example as simple as possible, it may still be quite difficult to understand. If you have any questions, please post a comment here or ask a question under “Q&A” and we will try our best to answer.
The following article explains the differences between paying Bonus separately and paying bonus together with the basic pay.
The following article explains how bonus calculations are done in Actpay