Official THR Tax Rules 2026: Payment Schedule, Amounts, and the Latest Deduction Scheme
As Ramadan approaches and in the midst of geopolitical dynamics, THR remains eagerly anticipated ahead of Idul Fitri 1447 Hijriah. However, workers should note that THR 2026 remains subject to PPh 21, in line with applicable tax rules.
Minister of Manpower Yassierli emphasised that, to date, there has been no new regulation exempting tax on THR. Under PMK Number 168 of 2023, THR is categorised as irregular income and is combined with the monthly salary in calculating that month’s tax.
The government uses the Average Effective Rate (TER) method, which makes the deduction in the THR month appear larger. This occurs because the total gross income for that month surges (salary + THR), pushing the total into a higher tax bracket.
Can a company pay THR in instalments? No. THR must be paid in full and on time, in accordance with the Circular Letter from the Minister of Manpower.
What if I have only worked for three months? You are still entitled to THR with a proportional calculation: (Length of Service / 12) x 1 month of basic pay.
Why is the regular monthly tax only hundreds of thousands, but THR becomes millions? Because the TER scheme calculates tax based on the total money deposited into your account in that month. However, annually (when filing the SPT), the total tax you pay will be the same as under the normal progressive rates.
Who is subject to THR 2026 tax? Check the latest TER scheme rules for the private sector and the list of sectors exempt from tax under PMK 105/2025 here.
Minister of Manpower Yassierli confirms THR 2026 remains taxable under PPh 21. See the latest TER rate schedule and the tax treatment differences for THR between workers and ASN here.