Indonesia's 2026 Holiday Allowance (THR) Will Be Taxed — Here's How to Calculate Your Deduction

Introduction

As millions of Indonesian workers prepare to receive their Tunjangan Hari Raya (THR) or holiday allowance ahead of Lebaran 2026, the Directorate General of Taxes (DJP) has confirmed that these payments will be subject to income tax. The new calculation method, known as Tarif Efektif Rata-rata (TER) or Average Effective Rate, represents a significant change from previous years and will affect how much workers actually take home.

What Is THR?

Tunjangan Hari Raya (THR) is a mandatory holiday bonus that employers in Indonesia must pay to their employees before major religious holidays. For Muslim employees, this means Lebaran (Idul Fitri). The THR is equivalent to one month’s salary and is a legal requirement under Indonesian labor law.

For 2026, THR payments must be made at least seven days before Idul Fitri, giving workers extra money for mudik (homecoming travel), family gatherings, and holiday celebrations.

The Tax Change: What’s Different in 2026?

New TER Method

Starting in 2026, THR taxation uses the Tarif Efektif Rata-rata (TER) method, which differs from the previous calculation approach. Under the old system, tax on THR was calculated by cumulating the irregular income with annual gross income. The new TER method simplifies this by applying an average effective tax rate.

How TER Works

The TER method calculates tax by:

Determining gross income: Add THR to the employee’s annual gross income (January through November)
Applying the TER rate: Use the TER table based on income bracket
Calculating final tax: Multiply gross income by the applicable TER percentage

This approach is designed to make tax calculation more transparent and easier for both employers and employees to understand.

Who Pays Tax on THR?

Not Everyone Is Taxed

THR is only taxed if the employee’s total irregular income exceeds the Penghasilan Tidak Kena Pajak (PTKP) threshold. For 2026, the PTKP for a single individual (TK/0 status) is Rp 54,000,000 per year.

If your total irregular income (including THR) falls below the PTKP threshold, you won’t owe any tax on your holiday allowance.

Income Brackets Matter

The amount of tax depends on your income bracket. Higher earners pay a larger percentage. The TER rates are progressive, meaning:

Lower income brackets: Lower TER percentage
Higher income brackets: Higher TER percentage

Calculation Examples

Example 1: Entry-Level Employee

Let’s say you earn Rp 8,000,000 per month:

THR: Rp 8,000,000 (one month’s salary)
Annual gross income (Jan-Nov): Rp 88,000,000
Total with THR: Rp 96,000,000
PTKP status: TK/0 (single, no dependents)
TER rate: Approximately 5% (varies by bracket)
Estimated tax on THR: ~Rp 400,000

Example 2: Mid-Level Manager

For someone earning Rp 25,000,000 per month:

THR: Rp 25,000,000
Annual gross income (Jan-Nov): Rp 275,000,000
Total with THR: Rp 300,000,000
TER rate: Higher bracket, approximately 15-20%
Estimated tax on THR: ~Rp 3,750,000 to Rp 5,000,000

Example 3: Senior Executive

For a senior executive earning Rp 75,000,000 per month:

THR: Rp 75,000,000
Annual gross income (Jan-Nov): Rp 825,000,000
Total with THR: Rp 900,000,000
TER rate: Highest bracket, approximately 25-30%
Estimated tax on THR: ~Rp 18,750,000 to Rp 22,500,000

Deductions That Reduce Your Tax

Biaya Jabatan (Position Allowance)

Employees can deduct 5% of their gross income as position allowance, up to a maximum of Rp 500,000 per month or Rp 6,000,000 per year. This reduces the taxable base.

Pension Contributions

Iuran pensiun (pension contributions) are also deductible. These are typically 1% of gross salary for private sector employees and 4.75% for civil servants.

Calculating Net Income

To calculate your taxable income:

Start with gross income + THR
Subtract position allowance (5%, max Rp 6,000,000/year)
Subtract pension contributions
Apply PTKP deduction
Calculate tax on remaining amount

Impact on Workers

Take-Home Pay Reduction

The taxation means workers will receive less than their full THR amount. For example:

THR: Rp 10,000,000
Tax deduction (assuming 10% TER): Rp 1,000,000
Net THR received: Rp 9,000,000

This reduction affects holiday spending budgets, mudik travel plans, and family gift-giving.

Employer Responsibilities

Employers must:

Calculate the correct tax amount using TER
Withhold tax from THR payments
Report and remit taxes to DJP
Provide employees with proof of tax withholding

Timing Considerations

THR must be paid at least seven days before Idul Fitri. Employers should calculate tax deductions early to ensure accurate payments and compliance.

Controversy and Public Response

Worker Concerns

Many workers have expressed frustration that their already-taxed salary results in additional taxation on THR. Critics argue that the holiday allowance is meant to help families celebrate, not generate additional government revenue.

Government Justification

The DJP maintains that THR is classified as irregular income (penghasilan tidak tetap) and is therefore subject to PPh 21 (income tax) under Indonesian tax law. The TER method is presented as a simplification that makes calculations more transparent.

Economic Impact

The taxation affects consumer spending during the holiday season. With less disposable income, families may:

Reduce mudik travel
Spend less on gifts and celebrations
Cut back on household purchases

This could impact retail, transportation, and hospitality sectors that typically see a surge during Lebaran.

How to Calculate Your Own THR Tax

Step-by-Step Guide

Determine your PTKP status: TK/0 (single), K/0 (married, no kids), K/1 (married, 1 child), etc.
Calculate annual gross income: Add up January through November salary
Add THR: Include your holiday allowance
Subtract deductions: Position allowance and pension contributions
Find your TER rate: Check DJP’s TER table for your income bracket
Calculate tax: Multiply gross income by TER percentage
Determine THR portion: The tax attributable to your THR payment

Online Calculators

Several websites offer THR tax calculators that can help you estimate your deduction:

Klikpajak.id
Glints.com
Bisnis.com

Future Outlook

TER Implementation

The TER method is part of broader tax reforms aimed at simplifying Indonesia’s tax system. The government expects the new method to:

Reduce calculation errors
Improve compliance
Increase tax revenue transparency

Potential Adjustments

As with any new tax implementation, adjustments may be made based on:

Feedback from employers and employees
Revenue collection data
Economic impact assessments

Conclusion

The taxation of THR using the TER method represents a significant change for Indonesian workers in 2026. While the government argues that the new system is simpler and more transparent, workers will see their holiday allowances reduced by tax deductions.

Understanding how the TER calculation works allows employees to plan their holiday budgets more effectively. By knowing their PTKP status, income bracket, and applicable deductions, workers can estimate their net THR and adjust their Lebaran plans accordingly.

As the implementation progresses, both employers and employees will need to adapt to the new system. The key is preparation: calculate early, understand your tax bracket, and plan your holiday spending with the net amount in mind.

Sources

Kompas — “DJP Benarkan THR 2026 Akan Kena Pajak, Ini Hitungannya” — Source
CNBC Indonesia — “THR Pegawai Swasta Kena Pajak, Begini Perhitungannya!” — Source
Liputan6.com — “Cara Menghitung Pajak THR Terbaru dengan Metode TER” — Source
Bisnis.com — “Cara Menghitung THR Karyawan dan Simulasi Pajak di Tahun 2026” — Source
Merdeka.com — “Skema Baru Menghitung Pajak THR dengan Metode TER, Pemotongan Pajak Diharapkan Lebih Mudah dan Transparan” — Source
Glints — “Cara Hitung Pajak THR Plus Simulasi Tiap Golongan TER” — Source
Mekari Klikpajak — “Panduan Lengkap Ketentuan Pajak THR (Tunjangan Hari Raya)” — Source