Workers Earning up to IDR 10 Million Exempt from Income Tax Article 21 Throughout 2026: Here Are the Conditions!
JAKARTA. The government has once again introduced an income tax incentive for workers to maintain purchasing power and economic stability in 2026. The Minister of Finance, Purbaya Yudhi Sadewa, has stipulated an exemption from Income Tax Article (ITA) 21 for workers with gross monthly income of up to IDR 10 million in certain designated business sectors.
This policy is set out in Minister of Finance Regulation (PMK) No. 105 of 2025 on ITA 21 on Certain Income Borne by the Government. The regulation has been effective since 31 December 2025 and forms part of the economic stimulus package for the 2026 fiscal year.
“To maintain the sustainability of public purchasing power and to carry out economic and social stabilization functions in 2026, an economic stimulus package has been established as part of the government’s efforts to safeguard public welfare, including through the provision of fiscal facilities,” reads the consideration section of PMK 105/2025, as quoted from CNBCIndonesia.com, Monday (5/1).
Applicable to Certain Sectors
The government-borne ITA 21 incentive applies to the January to December 2026 tax periods. It primarily targets workers in the footwear, textiles and apparel, furniture, leather and leather goods, and tourism sectors.
These five sectors encompass 133 main Business Classification (KLU) codes recorded in the administrative database of the DGT (Directorate General of Taxes).
Eligible recipients include certain permanent employees and certain non-permanent employees working in the designated sectors. The income threshold for this facility is gross income of a fixed and regular nature not exceeding IDR 10 million per month, applicable both to employees who were already employed before January 2026 and to those who commence employment during 2026.
Scope of Gross Income
The gross income referred to includes salary and fixed allowances, as well as other similar remuneration that is fixed and regularly received, in accordance with company regulations or employment agreements.
For non-permanent employees who already have a Tax Identification Number (TIN), the incentive is granted subject to the condition that the average daily wage does not exceed IDR 500,000 for daily, weekly, unit-based, or piece-rate schemes, or does not exceed IDR 10 million for monthly income.
The government also emphasizes that workers receiving this facility may not concurrently receive other ITA 21 incentives borne by the government under the prevailing tax regulations. The incentive is provided by the employer in the form of a cash payment at the time the income is paid to the employee.
Excluded from ITA 21 Calculation
The ITA 21 borne by the government is not treated as taxable income. However, employers remain required to prepare withholding tax slips and report the utilization of the incentive for each tax period.
“Employers are required to report the utilization of the ITA 21 borne by the government for each Tax Period,” as stipulated in PMK No. 105 of 2025.
Furthermore, the Directorate General of Taxes (DGT) will conduct supervision through guidance, review, and compliance testing to ensure that the utilization of the incentive is carried out in accordance with the prevailing tax laws and regulations. (KEN)
