The most complex support question we get at Actpay is regarding PCB calculations. Customers often receive very unexpected results when using our payroll software and query our calculations. Without exception for the last 5 years our PCB calculations have always been proven to be right. In this article we will explain the basic foundations of PCB calculations and why some results that seem wrong, but are actually right.
The following question was asked on a Facebook group and will be used as a basis for explaining how pcb calculations work. 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.
Following is the results based on LHDN’s computerized calculation method. Click here to download “Specification For MTD Calculation Using Computerised Calculation For 2023”
*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″.
The following calculations are based on the Updated PCB Calculation Table for 2023.
PCB Calculation Table 2023
| P (RM) | M (RM) | R (%) | B Category 1 & 3 (RM) | B 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 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″.
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/
There are 3 unexpected points to note in the above calculations.
- Zero PCB for months 4,5,7,8,10 and 11.
- Quarterly PCB decreases every month.
- 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.
Note that the total Annual PCB for both calculations is 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 | ||
| P | = | [∑(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.
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 |
The alternate way of calculating this is to classify the Incentive as Additional Remuneration as suggested by another user. 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.
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.
This is the reason the monthly basic income PCB remains at RM110 every month. Instead of decreasing PCB every month, PCB increases every month. Total tax for the basic + incentive is already paid out and therefore no excess PCB is paid out. The estimated income is based on what is currently earned.