RADAR TULUNGAGUNG – The THR tax policy has become a major topic of discussion as Indonesia approaches Eid al-Fitr 2026. Workers across the country expect to receive Tunjangan Hari Raya (THR), a mandatory holiday allowance that companies must pay before the festive season.
Under Indonesian labor regulations, THR is not only a worker’s right but also part of taxable income. Therefore, the THR tax applies to employees who receive the allowance depending on their income level and the applicable income tax rules.
Officials from the Directorate General of Taxes explained that the THR tax falls under Income Tax Article 21 (PPH 21). The tax calculation depends on each employee’s total income, including their regular salary and other benefits.
The explanation comes as many employees prepare for Eid celebrations while also seeking clarity about tax deductions that may apply to their holiday allowance.
THR Is a Mandatory Right for Workers
In Indonesia, THR is a mandatory benefit that employers must provide to workers ahead of major religious holidays such as Eid al-Fitr.
The policy is regulated under Law No. 13 of 2003 on Manpower. According to Article 6 paragraph 6 of the regulation, companies must distribute THR no later than seven days before the holiday.
For Eid al-Fitr 2026, this means workers should receive their holiday allowance at least one week before the celebration begins.
Authorities stress that THR differs from regular salary payments. Companies provide THR as an annual benefit meant to help employees prepare for the increased spending typically associated with the holiday season.
If a company fails to pay the allowance or delays the payment, the employer may face administrative sanctions according to labor regulations.
Government officials therefore urge companies to fulfill their obligations on time to avoid penalties and protect employee rights.
How the THR Tax Is Calculated
While THR functions as a benefit for workers, it also counts as taxable income. The THR tax is included in Income Tax Article 21, which covers employee income.
According to tax officials, the income tax rate applied to THR varies depending on the employee’s monthly income bracket.
Indonesia’s progressive tax system applies different percentages to different income levels. The applicable rate ranges from 0 percent to 34 percent, depending on the employee’s earnings.
To determine the correct tax amount, authorities calculate THR together with the employee’s salary and other taxable income.
Tax officials also apply specific rules when calculating the final tax during the last tax period of the year. They follow provisions outlined in Article 17 paragraph 1 letter A of the Income Tax Law.
This method ensures that the tax deduction reflects the employee’s overall income throughout the year.
Workers with Lower Income May Not Pay THR Tax
Not all employees must pay income tax on their THR. Workers whose income remains below a certain threshold are exempt from the tax.
Employees earning less than approximately 5.4 million rupiah per month, including their THR, fall into the non-taxable category.
In this bracket, the THR tax rate is effectively zero percent.
Meanwhile, employees whose income exceeds 5.4 million rupiah but remains below roughly 5.65 million rupiah face a small tax rate starting from about 0.25 percent.
The rate gradually increases for higher income groups according to Indonesia’s progressive tax structure.
Authorities encourage employees to review their income category to understand how the tax rules apply to their holiday allowance.
Importance of Understanding THR Tax Rules
As the Eid holiday approaches, understanding THR tax regulations becomes increasingly important for both workers and employers.
For employees, knowing the tax structure helps them estimate the net amount they will receive from their holiday allowance.
For companies, accurate tax calculation ensures compliance with government regulations and prevents administrative issues.
The Directorate General of Taxes encourages employers to calculate employee tax obligations carefully and provide clear information to workers regarding deductions applied to their THR.
Officials also emphasize that transparency in payroll and tax reporting will help avoid confusion among employees during the holiday season.
With millions of Indonesian workers expecting their holiday allowance before Eid 2026, the government hopes better understanding of THR taxation will ensure smooth payment processes and protect workers’ rights.