How is PCB calculated by the app?

The app calculates PCB based on a formula set out by the LHDN. Our app's calculations are fully compliant with their specifications and we can confirm that PayrollPanda is LHDN approved

While the formula is quite complicated it can be summarized as follows:

  1. Taxable income = Previous salary + (Recurring items in monthly salary + Non-recurring items in monthly salary) + Recurring items from monthly salary * Number of months remaining in the year
  2. Taxable income - Deductions = Chargeable income
  3. Total yearly tax is then calculated on the chargeable income
  4. PCB = (Total yearly tax - PCB already paid)/Number of months remaining

This formula allows us to answer some frequently-asked questions, namely:

(Note: in the following examples EPF and SOCSO deductions are being ignored to make the examples easier to understand).


1. Why do I need to put in my previous payslip data?

Looking at step 1 of the formula we see that previous payslip data is included in the calculation of taxable income. If you do not put in your previous payroll data then the app will incorrectly calculate your PCB.

Example:

Nick has been working at his company since the beginning of 2016, earning RM 6,000 monthly.

In November 2016, his company switches to PayrollPanda but his payroll officer does not add his previous payslip data, and only inputs a salary of RM 6,000. At the end of November when the app tries to run payroll it will estimate his total yearly income at only RM 12,000 and hence will calculate his PCB for November as being RM 0. This is, of course, incorrect.


2. Are personal deductions taken into account?

From step 2 of the formula we can see that personal deductions are taken into account.

Example:

  • Amin is single, unmarried and has no children. He has been earning RM 4,000 monthly since the start of 2016.
  • Rayzal is married to a non-working spouse, and has two children. He has also been earning RM 4,000 monthly since the start of 2016.

When both these employees are entered into the app only Amin will be asked to pay PCB.

Amin’s chargeable income will be calculated at 12 * 4,000 - 9,000 (personal deduction) = RM 39,000 - which puts him into a tax paying income bracket.

Rayzal’s chargeable income on the other hand will be calculated as 12 * 4,000 - 9,000 (personal deduction) - 2,000 (child deduction) - 2,000 (child deduction) - 4,000 (spouse deduction) = RM 31,000. This means he does not fall into the taxable income bracket and hence his PCB will RM 0.


3. What is the difference between recurring and non-recurring items?

From step 1 we see that recurring items are estimated to continue into the following months, while non-recurring items are not.

Example: Aiman earns RM 4,000 a month with a recurring attendance allowance of RM 500.

When the app estimates Aiman’s yearly income (assuming payroll was run for the month of January) it does so like this: (4,000 + 500) + (4,000 + 500) * 11 =  RM 54,000.

If instead the attendance allowance isnotrecurring the app will estimate his yearly income like this: (4,000 + 500) + (4,000) * 11 = RM 48,500.


4. What happens if I overpay/underpay PCB?

Looking at step 4 of the formula - if the person overpays or underpays PCB, the PCB for the following months will be automatically adjusted.

Example: Anne has started a new job in January 2016. She is single, unmarried and has no children. She is paid RM 4,000 a month.

This means that her total yearly tax should be RM 1,300. If her employer correctly deducts PCB every month her monthly PCB should be 1300/12 = RM 108.35.

However, in the month of January, her employer forgets to deduct PCB from her payslip. This means that in month of February her PCB would then be 1300/11 = RM 118.20 as there was no payment in January.

This figure should remain unchanged in the following months if there are no changes to her salary, e.g.

For March PCB = (1300 - 118.20)/10 = RM 118.20

For April PCB = (1300 - 118.20 - 118.20)/9 = RM 118.20

etc.


This help article was compiled for version 0.32.1 of app.payrollpanda.my

Was this article helpful?

Get Started

Can’t find what you’re looking for?

Our award-winning customer care team is here for you.

Contact Support