Statutory · Updated July 2026
PCB / MTD Monthly Tax Deduction: Employer's Guide
PCB (Potongan Cukai Bulanan), also called MTD (Monthly Tax Deduction), is the income tax employers in Malaysia must deduct from employees' monthly remuneration and remit to LHDN by the 15th of the following month via e-PCB, e-Data PCB or approved payroll software. The deduction is calculated using LHDN's MTD schedule or the computerised calculation method, based on progressive resident tax rates ranging from 0% to 30%. Failure to deduct or remit is an offence, and the employer becomes liable for the unpaid amounts plus fines.
Key facts
- PCB/MTD = Potongan Cukai Bulanan / Monthly Tax Deduction — income tax deducted at source by the employer
- Remittance deadline: the 15th of the month following the wage month, via e-PCB, e-Data PCB or approved payroll software
- Two computation methods: LHDN's MTD schedule (Jadual PCB) or the computerised calculation formula
- Resident individual tax rates are progressive from 0% to 30% (top rate above RM2,000,000)
- Form EA to every employee by end of February; Form E to LHDN by 31 March
- Employees can update reliefs affecting MTD via Form TP1 (claims through employer) and TP3 (prior employment income)
What PCB / MTD is
PCB (Potongan Cukai Bulanan), known in English as MTD (Monthly Tax Deduction), is a pay-as-you-earn mechanism under the Income Tax (Deduction from Remuneration) Rules 1994. The employer, not the employee, is legally responsible for deducting the correct amount of income tax from each month's remuneration and paying it to LHDN (Lembaga Hasil Dalam Negeri, the Inland Revenue Board).
Remuneration subject to MTD includes salary, wages, overtime pay, commission, bonuses, allowances, directors' fees and perquisites. MTD spreads the employee's annual tax liability across the year so that by filing time the tax is largely or fully paid; for many employees with only employment income, MTD can serve as a final tax so no separate return adjustment is needed if they opt for it.
How MTD is computed: schedule vs computerised method
LHDN permits two calculation methods, and both must produce deductions consistent with the Income Tax (Deduction from Remuneration) Rules:
- MTD schedule (Jadual PCB): a lookup table published by LHDN where the deduction is read off based on monthly remuneration, marital status and number of children. Simple, but coarser and increasingly a legacy method.
- Computerised calculation method: the LHDN formula implemented in e-PCB, e-CP39 and approved payroll software. It annualises current and year-to-date remuneration, applies reliefs and rebates, and derives a more precise monthly deduction — required for handling bonuses, additional remuneration and mid-year joiners correctly.
The computerised method handles one-off payments such as bonuses by computing the additional tax on the annualised income including the bonus, which prevents large under- or over-deductions in bonus months.
Resident tax rates overview (progressive 0% to 30%)
MTD amounts derive from the resident individual progressive tax scale. The bands for YA 2025/2026 start at 0% and top out at 30% on chargeable income above RM2,000,000. An abbreviated view:
| Chargeable income (annual) | Rate |
|---|---|
| First RM5,000 | 0% |
| RM5,001 to RM20,000 | 1% |
| RM20,001 to RM35,000 | 3% |
| RM35,001 to RM50,000 | 6% |
| RM50,001 to RM70,000 | 11% |
| RM70,001 to RM100,000 | 19% |
| RM100,001 to RM400,000 | 25% |
| RM400,001 to RM600,000 | 26% |
| RM600,001 to RM2,000,000 | 28% |
| Above RM2,000,000 | 30% |
Employer obligations and deadlines
- Deduct MTD from each employee's remuneration every month according to the schedule or computerised method
- Remit the deducted amounts to LHDN by the 15th of the following month via e-PCB Plus, e-Data PCB or approved payroll software (electronic submission of CP39 data is mandatory)
- Register new employees for tax and notify LHDN of commencement (Form CP22) and cessation or departure where required (CP22A / CP21)
- Keep payroll records supporting each month's deductions
| Obligation | Deadline |
|---|---|
| Remit monthly PCB (CP39 data + payment) | 15th of the following month |
| Form EA (annual remuneration statement) to each employee | End of February |
| Form E (employer's annual return) to LHDN | 31 March (grace period usually applies for e-Filing) |
| Notify LHDN of new hire (CP22) | Within 30 days of commencement |
What happens if you fail to deduct or remit
Failing to deduct MTD, deducting but not remitting, or remitting late are offences under the Income Tax Act 1967 and the Deduction from Remuneration Rules. On conviction, each offence carries a fine of RM200 to RM20,000, imprisonment of up to 6 months, or both — and the employer remains liable to pay the outstanding MTD to LHDN as a debt due, even if it was never deducted from the employee.
LHDN can also take civil recovery action and impose increases on unpaid amounts. In practice, employers who discover under-deductions should correct them promptly through e-PCB and engage LHDN early rather than wait for an audit.
Reliefs that change MTD: Forms TP1 and TP3
MTD is only as accurate as the data behind it. Two employee declaration forms adjust the calculation during the year:
- Form TP1: an employee claims additional reliefs and rebates through the employer (e.g. medical expenses, education fees, lifestyle relief, zakat) so the monthly deduction is reduced in-year rather than refunded at filing. Employers must apply valid TP1 claims at least twice a year when submitted.
- Form TP3: a new hire declares remuneration and deductions from previous employment in the same year, so the new employer's computerised MTD accounts for year-to-date figures and does not restart the progressive scale from zero.
Automating this with an HR system
PCB is the most error-prone statutory deduction to do by hand because it depends on annualised income, year-to-date figures, marital status, children, EPF deductions and in-year relief claims. An HR system like staffs.id implements the computerised calculation method, computing PCB alongside EPF, SOCSO and EIS in every payroll run for both monthly-salaried full-timers and hourly part-timers.
Because attendance, overtime and special pay day earnings feed directly into the same payroll engine, the remuneration base for MTD is complete and consistent, and monthly figures are ready for e-PCB submission before the 15th deadline.
Frequently asked questions
What is PCB or MTD in Malaysian payroll?
PCB (Potongan Cukai Bulanan), or Monthly Tax Deduction (MTD), is the income tax an employer must deduct from an employee's monthly pay under LHDN's rules and remit to LHDN by the 15th of the following month.
When is the PCB payment deadline for employers?
The 15th of the month following the wage month, submitted electronically via e-PCB, e-Data PCB or approved payroll software together with the CP39 data.
What happens if an employer does not deduct PCB?
It is an offence carrying a fine of RM200 to RM20,000, up to 6 months' imprisonment, or both, per offence — and the employer remains personally liable to pay the outstanding MTD to LHDN even if it was never deducted from the employee.
How is PCB calculated in Malaysia?
Either from LHDN's published MTD schedule (based on remuneration, marital status and children) or, more commonly, via the computerised calculation method that annualises income, applies reliefs and the progressive 0% to 30% resident rates, and derives the monthly deduction.
What are Form EA and Form E deadlines?
Employers must give each employee a Form EA by the end of February and submit Form E to LHDN by 31 March each year (an e-Filing grace period usually applies).