If you’ve ever looked at your payslip and wondered why your take-home pay is lower than your gross salary, you’re not alone. Every month, employers in Malaysia deduct several taxes and statutory contributions from your salary before paying you.
Understanding these deductions helps you manage your finances, verify your payslip, and estimate your net salary after tax. Let’s break down exactly what’s being deducted — and why.
Quick Overview: Taxes and Deductions From Salary
When you receive your monthly salary, several mandatory deductions apply under Malaysian law. These include:
| Deduction Type | Description | Who Pays | Typical Rate |
|---|---|---|---|
| PCB (Monthly Tax Deduction) | Advance payment of income tax withheld from your monthly salary. | Employee | Based on income bracket |
| EPF (Employees Provident Fund) | Retirement savings contribution. | Employee & Employer | 9% (employee) + 12%–13% (employer) |
| SOCSO (Social Security Organisation) | Protection against employment injuries and invalidity. | Employee & Employer | 0.5% (employee) + 1.75% (employer) |
| EIS (Employment Insurance System) | Unemployment benefits and job search support. | Employee & Employer | 0.2% each |
| Zakat (if applicable) | Islamic tithe for Muslim employees. | Employee | Based on income |
These are statutory deductions — meaning they are legally required and regulated by the LHDN (Inland Revenue Board), EPF, and SOCSO authorities.
If you want to calculate your deductions and take-home pay, you can try the Malaysia Salary Tax Calculator.
Understanding Your Payslip: From Gross to Net Salary
A typical Malaysian payslip includes these three main sections:
- Gross Salary – Your full salary before any deductions.
- Deductions – Taxes and contributions like PCB, EPF, SOCSO, and EIS.
- Net Salary – What you actually receive in your bank account.
Let’s look at how each tax and contribution affects your income.
Income Tax (PCB – Potongan Cukai Bulanan)
PCB, or the Monthly Tax Deduction, is a prepayment toward your annual income tax.
Your employer deducts this each month and sends it directly to LHDN.
The amount depends on:
- Your total monthly income (including allowances and bonuses)
- Your marital status and number of dependents
- Your approved deductions and reliefs
If too much is deducted, you’ll receive a refund after submitting your annual tax return. You can use the Malaysia Tax Refund Calculator to estimate this.
EPF (Employees Provident Fund)
EPF is your retirement savings account. It’s not technically a tax, but it’s a mandatory contribution under Malaysian labour law.
- Employee contribution: 9% of your salary
- Employer contribution: 12% or 13%, depending on your wage level
These funds go into your EPF account and can be withdrawn upon retirement, property purchase, or specific approved reasons.
You can check how this affects your take-home using the Malaysia Income Tax Rate Calculator.
SOCSO (Social Security Organisation)
SOCSO provides protection against work-related injuries, disability, or death.
The deduction is 0.5% of your salary, while your employer contributes about 1.75%.
SOCSO has two key schemes:
- Employment Injury Scheme
- Invalidity Scheme
Even though this isn’t an income tax, it’s still a salary deduction you’ll see every month.
EIS (Employment Insurance System)
EIS supports workers who lose their jobs involuntarily.
Both the employer and employee contribute 0.2% each of the monthly salary.
If you ever face retrenchment or redundancy, you can claim benefits through SOCSO’s EIS program.
Optional Deduction: Zakat (for Muslim Employees)
Muslim employees may choose to have Zakat automatically deducted from their salary.
It can also act as a tax rebate against your annual income tax when reported to LHDN.
You can calculate your amount using the Malaysia Zakat Calculator.
Example: Salary Deduction Breakdown
Here’s a sample calculation for an employee earning RM 5,000/month.
| Item | Amount (RM) | Notes |
|---|---|---|
| Gross Salary | 5,000 | Before deductions |
| EPF (9%) | -450 | Employee portion |
| SOCSO (0.5%) | -25 | Employee portion |
| EIS (0.2%) | -10 | Employee portion |
| PCB (estimated) | -200 | Based on tax bracket |
| Net Salary | RM 4,315 | Take-home pay |
This example assumes no additional allowances or deductions.
If you earn bonuses or commissions, your PCB may increase temporarily.
Common Questions About Salary Deductions
1. Why is my take-home pay lower than my gross salary?
Because statutory deductions like EPF, SOCSO, EIS, and PCB are automatically withheld each month.
2. Do all employees pay income tax?
No. Only employees earning above the minimum taxable income threshold (RM 34,000 per year after EPF) are subject to income tax.
3. Is EPF considered a tax?
No, it’s a retirement savings contribution. However, it’s deducted from your salary similar to tax.
4. Can I reduce my PCB deduction?
Yes. You can submit the TP1 form to your employer to update your reliefs and rebates.
5. Are allowances and bonuses taxed?
Yes. They are treated as part of your total income, which can affect your PCB amount.
Willium is the creator of IncomeTaxCalculatorMalaysia.com, a trusted resource for accurate and easy-to-use tax calculation tools. With a deep understanding of Malaysia’s tax system, he helps individuals and businesses estimate their income tax with confidence. Willium is dedicated to simplifying financial decisions by offering clear, reliable tools and expert guidance, empowering users to stay informed and save time.