3 PCB Calculation Methods Explained

PCB Calculations are the most asked support question we get at Actpay. Many customers receive very unexpected results and query our software calculations. Although our calculations have always been correct, it often takes very long to explain how the PCB calculation are done. In this article we will explain the basic foundations of PCB calculations and why some results that seem wrong, but are actually right. 

This article answers the following questions.

  1. Basics of PCB Calculations
  2. 3 different ways to calculate PCB
  3. Special formulas to handle Additional Remuneration and Bonus
  4. Why it is important to use Additional Remuneration where needed
  5. Complete Guide and explanation of 3 PCB Calculation Methods
  6. Differences in Manual PCB Calculations for those not using Software

The following calculations are based on the Updated PCB Calculation Table for 2023.

From the LHDN website at : https://www.hasil.gov.my/en/employers/mtd-payment/

MTD is determined either by using the Computerized Payroll Calculation Method or e-Jadual PCB via e-CP39 on the IRBM website.

Submission of MTD Statement can be made through e-Data PCB / e-PCB / eCP39 which is provided for free on the official portal of IRBM @ www.hasil.gov.my (MyTax> ezHasil Services).

PCB Calculation Table 2023

P  (RM) M (RM) R (%) Category 1 & 3 (RM) Category 2 (RM)
5,001 – 20,000 5,000 1 – 400 – 800
20,001 – 35,000 20,000 3 –250 –650
35,001 – 50,000 35,000 6 600 600
50,001 – 70,000 50,000 11 1,500 1,500
70,001 – 100,000 70,000 19 3,700 3,700
100,001 – 400,000 100,000 25 9,400 9,400
400,001 – 600,000 400,000 26 84,400 84,400
600,001 – 2,000,000 600,000 28 136,400 136,400
Exceeding 2,000,000 2,000,000 30 528,400 528,400

*Note : The PCB Table was updated in June 2023. January to May PCB Calculations are different from June 2023 onwards. For more information on this please read our article, “Changes to LHDN PCB Calculations for Budget 2023″.

Understanding PCB Calculations

To explain the basics of PCB calculations we will use the following example based on a question asked on Facebook. 

The following has been edited to simplify the question.

“I am earning eg. RM5,000 a month (x12 , total of RM60,000 /pa – inclusive of car allowance) and expected *incentive of about another RM60,000 /pa , when achieved, paid out quarterly”

My quick answer was “Your PCB will increase every quarter. PCB is based on ytd income” which turned out to be wrong on actual testing. Common sense often fails in predicting PCB results. This is a good example to understand the basics of PCB calculations.

*Note : The PCB Table was update in June 2023. January to May PCB Calculations are different from June 2023 onwards. For more information on this please read our article, “Changes to LHDN PCB Calculations for Budget 2023″.

Following is the payroll calculations for 12 months based on the above scenario. Results based on LHDN’s computerized calculation method. Click here to download “Specification For MTD Calculation Using Computerised Calculation For 2023” 

Method 1 using PCB Calculations based on Quarterly Incentive treated as Monthly Income.

Mth  Basic Pay   Incentive   Gross Pay   Net Income   Net PCB 
1    5,000.00             –        5,000.00    4,305.35       110.00
2    5,000.00             –        5,000.00    4,305.35       110.00
3    5,000.00  15,000.00    20,000.00  14,422.35    3,343.00
4    5,000.00             –        5,000.00    4,415.35             –  
5    5,000.00             –        5,000.00    4,415.35             –  
6    5,000.00  15,000.00    20,000.00  14,538.60    3,226.75
7    5,000.00             –        5,000.00    4,415.35             –  
8    5,000.00             –        5,000.00    4,415.35             –  
9    5,000.00  15,000.00    20,000.00  14,800.25    2,965.10
10    5,000.00             –        5,000.00    4,415.35             –  
11    5,000.00             –        5,000.00    4,415.35             –  
12    5,000.00  15,000.00    20,000.00  16,370.20    1,395.15
Total    60,000.00    60,000.00    120,000.00    95,234.20    11,150.00

 

Above calculations have been verified using LHDN online calculator at http://calcpcb.hasil.gov.my/

LHDN online pcb calculations
There are 3 unexpected points to note in the above calculations.

  1. Zero PCB for months 4,5,7,8,10 and 11.
  2. Quarterly PCB decreases every month.
  3. Big drop in PCB in month 12.

The first point to understand is that computerised and E-PCB calculations are based on Year to Date (YTD) income. 

To test the accuracy of the PCB calculation, calculate the PCB for December using 120,000 as the total gross income. This will show what is the Annual tax for this gross income. 

In other words calculating the same amount month by month and calculating the total in the month of December will give the same result because PCB calculations are based on total income for the year. 

Following is the calculation for 120,000 in December. Note that the total Annual PCB for both calculations is exactly the same at RM 11,500.

 

1. MTD to yearly net remuneration exclude the additional remuneration:  TOTAL (RM)
    Y1 = Current month’s normal remuneration; 120,000.00
    K1 = Contribution to EPF or Other Approved Funds paid subject to total qualifying amount for current month’s remuneration not exceeding RM4,000.00 per year; 4,000.00
    D = Deduction for individual; 9,000.00
    Q = Deduction for eligible Children 2,000.00
= [∑(0.00-0.00)+(120,000.00-4,000.00)+[(0.00-0.00) x 0] + (0-0)]-(9000.00+0.00+0.00+0.00+(2000 x 0)+0.00+0.00) 107,000.00
M   = Amount of first chargeable income for every range of chargeable income a year; 100,000.00
R   = Percentage of tax rates;   0.25
B   = Amount of tax on M less tax rebate for individual and spouse (if qualified);   9,400.00
Yearly Tax   = [(107,000.00-100,000.00)x 0.25 + (9,400.00 ) -( 0.00 + 0.00 )]/(0 +1) = 11,150.00 11,150.00

Explanation of PCB calculations.

1. Zero PCB for months 4,5,7,8,10 and 11

When calculating PCB, the system estimates the annual income and calculates the portion for the current month. For example, for January, the system calculates PCB for 60,000 (5,000 x 12) and divides it by 12 for one month. That is why month 1 and 2 have the same PCB.

In month 3 it calculates for 
– 10,000 (5,000 x 2) + (20,000 x 10) = 210,000.

Of course this is not the expected annual income for this staff. In other words, PCB was overpaid for the month of March. Therefore PCB for month 4 and 5 is zero because it is deducted from the overpaid amount because PCB calculations are based on YTD income.

2. Quarterly PCB decreases every month.

The reason for the decreasing value is because the estimated annual income decreases every quarter. Therefore
– month 6 is 20,000 (5,000 x 4) + 160,000 (20,000 x 8) = 180,000
and
– month 9 is 30,000 (5,000 x 6) + 120,000 (20,000 x 6) = 150,000
and
– month 12 is 40,000 (5,000 x 8) + 80,000 (20,000 x 4) = 120,000.

As can be seen the estimated annual income is lower as the months increase. Note that month 12, 120,000 is the correct annual income.

3. Big drop in PCB in month 12.

We finally come to month 12. In the previous months, excess PCB was deducted against the monthly PCB of 130.00. Since it is the final month, all the balance excess PCB paid is deducted so that the total PCB paid for the year is based on the actual annual income of 120,000.

Method 2 with PCB Calculations using Additional Remuneration

Mth  Basic Pay   Incentive   Gross Pay   Net Income   Net PCB   Add PCB   Basic PCB 
1    5,000.00             –        5,000.00    4,305.35       110.00            –       110.00
2    5,000.00             –        5,000.00    4,305.35       110.00            –       110.00
3    5,000.00  15,000.00    20,000.00  16,155.35    1,610.00  1,500.00     110.00
4    5,000.00             –        5,000.00    4,305.35       110.00            –       110.00
5    5,000.00             –        5,000.00    4,305.35       110.00            –       110.00
6    5,000.00  15,000.00    20,000.00  15,445.35    2,320.00  2,210.00     110.00
7    5,000.00             –        5,000.00    4,305.35       110.00            –       110.00
8    5,000.00             –        5,000.00    4,305.35       110.00            –       110.00
9    5,000.00  15,000.00    20,000.00  14,805.35    2,960.00  2,850.00     110.00
10    5,000.00             –        5,000.00    4,305.35       110.00            –       110.00
11    5,000.00             –        5,000.00    4,305.35       110.00            –       110.00
12    5,000.00  15,000.00    20,000.00  14,385.35    3,380.00  3,270.00     110.00
     60,000.00    60,000.00    120,000.00    95,234.20    11,150.00    9,830.00    1,320.00

This correct way of calculating PCB is to classify the Incentive as Additional Remuneration. Based on LHDN guidelines the income should only be classified as “Additional Remuneration” if it is once a year or possibly twice as in the case of Bonus. 

The importance of using this method is because if the staff resigns, in the previous calculation, the staff has overpaid their PCB.

In the above example, if the staff resigns on March 31st, the total PCB using the first method is :
110 + 110 + 3,343 = 3563

Using Method 2, the total PCB is :
110 + 110 + 1,610 = 1,830

Note that despite a different calculation method, the total PCB for the year is still the same for all 3 methods.

Unlike Basic income, Additional remuneration is calculated differently. Instead of tax based on annual income of
– 10,000 (5,000 x 2) + (20,000 x 10)
it is calculated based on
– (5,000 x 12) + 15,000 = 75,000.
and
– (5,000 x 12) + 30,000 = 90,000.
and
– (5,000 x 12) + 45,000 = 105,000.
and
– (5,000 x 12) + 60,000 = 120,000.

Compared to method 1, there are no months with zero PCB. PCB is paid every month because the full tax for the incentive for the year is already paid based on fixed basic income. 

Also, instead of PCB decreasing every month, PCB increases every month. Total tax for the basic + incentive increases as the year to date income increases with each month. The taxis based on what has been currently earned and not an estimate of future income.

 

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