Fixed and Additional Income Tax Base

Modified on Fri, 9 Jan at 10:41 AM

When calculating PCB, income is grouped into either Fixed or Additional income tax base:

Fixed Income Tax Base
This includes regular, recurring earnings processed every month, such as:

Basic salary
Monthly allowances
Monthly incentives

Worksy setup: Setting > Payroll > Payroll Items. Enable “Include as Fixed Income Tax Base” for applicable income items.

Under LHDN rules, any allowance that is fixed in amount, paid regularly, and paid together with monthly salary is considered part of taxable employment income. Therefore, such allowances are required to be included in the fixed income tax base for PCB calculation purposes.

If this option is not selected, the allowance will be treated as additional income, which is meant only for irregular or non-recurring payments. As a result, fixed recurring allowances would be taxed incorrectly, potentially leading to underpayment of PCB.

Additional Income Tax Base
This includes non-regular, ad hoc payments such as:

Bonuses
Commissions
One-off allowances or incentives
Other non-recurring payments

Worksy setup: Setting > Payroll > Payroll Items. Mark these items under Standard Tax Category, and disable “Include in Fixed Income Tax Base”.

Summary

The table below provides a quick summary of how different types of remuneration are treated in relation to statutory contributions and deductions in Malaysia. Refer below:

No.	Remuneration	PCB
No.	Remuneration	Fixed	Additional
1	Full-time & Part-time Basic Salary	✓
2	Overtime		✓
3	Non-Fixed Allowance		✓
4	Commission		✓
5	Fixed Incentive/Allowance	✓
6	Bonus		✓
7	Angpao (if processed in payroll)		✓
8	Unutilized Annual or Medical Leaves		✓
9	Gratuity		✓
10	Termination Benefit		✓
11	Retirement Benefit		✓
12	Director Fee		✓
13	Perquisite		✓
14	Employee's Share Option Scheme (ESOS)		✓
15	Tax borne by the employer		✓
16	Benefit In Kind (BIK)		✓
17	Value of Living Accommodation (VOLA)		✓

While this table serves as a general guide, our system is not responsible for any misclassification of income types.

To check tax exempted items and limit, refer to Tax Exempt Items for EA Form Section F.

For other statutory contribution list, please refer to Statutory Deductions and Employer Contributions List.

We hope this explanation clarifies the matter. If you require further assistance, please don't hesitate to contact our support team.