The system calculates PCB based on a formula set out by the LHDN.
While the formula is quite complicated it can be summarised as follows:
Taxable income = previous salary + (recurring items in monthly salary + non recurring items in monthly salary) + recurring items from this month’s salary * number of months remaining in the year
Taxable income - deductions = chargeable income
Total yearly tax is then calculated on the chargeable income
PCB = (total yearly tax - PCB already paid) /number of months remaining
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 system will incorrectly calculate your PCB.
(Note: in the following examples EPF and SOCSO deductions are being ignored to make the examples easier to understand).
Example:
Nick has been working at his company since the beginning of 2014, 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 system 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.
If the amount of PCB or PCB before deduction for zakat is less than ten ringgit, the employer is not required to make contribution for that particular employee to LHDN. Therefore, any PCB below RM 10 will be reflected as 0 in the system.
Please refer to our how to enter previous payslip information article for more information. PayrollPanda makes payroll easy. Book a demo.