What Income Is Subject to PCB Tax in Malaysia?

PCB (Potongan Cukai Bulanan), also known as Monthly Tax Deduction (MTD), is an income tax system in Malaysia where employers deduct tax from employees’ salaries every month and submit it to LHDN.

Understanding what income is subject to PCB helps employers calculate tax correctly and avoid penalties.

1. Monthly Salary (Basic Pay)

Basic salary is the main component subject to PCB tax. It includes:

• • Monthly wages
  • Fixed salary
  • Contract salary payments

2. Overtime Pay

Any extra hours worked beyond normal working hours are taxable.

Overtime pay is included in PCB calculations because it is part of employee earnings.

3. Allowances

Most allowances given by employers are taxable. These include:

• • Travel allowance
  • Meal allowance
  • Housing allowance
  • Attendance allowance
  • Fixed monthly allowances

4. Bonuses and Incentives

Employers must include bonuses and performance incentives in PCB calculations.

Examples:

• • Year-end bonus
  • Performance bonus
  • Sales commission bonus

5. Commissions

Employees who earn commissions (especially in sales roles) must include them in PCB calculations.

This includes:

• • Sales commissions
  • Project commissions
  • Performance-based commissions

Income That May Be Exempt

Not all money an employee receives is considered taxable income under PCB. Some payments are just reimbursements, meaning the employer is paying back money the employee already spent for work purposes.

1. Certain reimbursements (with receipts)

If employees spend their own money for work and later claim it back, this is usually not taxable.

👉 Example:
An employee buys office stationery or pays for a business-related item and submits a receipt. The company reimburses the exact amount.

2. Claims for official business expenses

These are work-related expenses paid by employees on behalf of the company.

👉 Example:

• • Client meeting expenses
  • Parking fees during work travel
  • Printing or courier costs for office use

3. Some travel reimbursements

If employees travel for work and the company reimburses actual travel costs, this is usually not taxable.

👉 Example:

• • Transport fare (Grab, petrol, toll)
  • Hotel stay for business trip
  • Meal expenses during official travel

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