Don't Worry! Here's How to Calculate Tax on Holiday Allowance
Jakarta, CNBC Indonesia - As Lebaran approaches, the payment of Tunjangan Hari Raya (THR), or Holiday Allowance, is one of the most anticipated moments for workers throughout Indonesia, whether civil servants or private sector employees.
However, employees must pay tax on the THR they receive. Why is THR taxed? Because THR constitutes additional income received by employees/workers.
Under Law PPh 7/2021 Article 4 Paragraph 1, income is defined as any increase in economic capacity received or obtained by a taxpayer, whether originating from Indonesia or abroad, which can be used for consumption or to increase the wealth of the taxpayer in question, regardless of name and form.
Meanwhile, under Article 21 Paragraph 1 Letter a, tax withholding on income related to work, services, or activities in any name and form received or obtained by domestic individual taxpayers must be carried out by the employer who pays salary, wages, honorarium, allowances, and other payments as remuneration for work performed by employees or non-employees.
The tax calculation method uses the monthly effective rate (TER). To calculate PPh Article 21 on THR, the following formula can be used:
THR Gross × Monthly TER.
To determine the TER, reference can be made to Government Regulation 58/2023 and Ministerial Decree 168/2023, or alternatively, the tax calculator at kalkulator.pajak.go.id can be used.
Example of Tax Calculation on THR
As an example, Mr Argi, a permanent employee at PT BGM, worked full-time throughout 2025 with a monthly income of Rp 5,800,000, with no additional income, and is married with no dependents (K/0).
Mr Argi received THR equivalent to 1x his monthly salary in March, variable overtime payments in February, May, and November, and bonuses of 2x his monthly salary in October, as well as JKK and JKM insurance premiums of Rp 80,000 per month.
Based on the TER calculation, the PPh Article 21 payable on THR and salary in March is calculated as follows:
(Salary + THR + JKK & JKM Premiums) Rp 11,680,000 × 4.00% (TER Category A) = Rp 467,000 (PPh 21 Payable).
The PPh Article 21 for March will subsequently be recalculated at year-end to determine any remaining PPh Article 21 for December that must be withheld or refunded.
In this example, it transpired that PT BGM had over-withheld PPh Article 21 due to TER application in the amount of Rp 963,800.
Therefore, PT BGM is obligated to refund the excess withholding to Mr Argi.
Mr Argi also has the right to enquire about the status of the excess tax withholding with his company.