The government's plan to raise the non-taxable income (penghasilan tidak kena pajak/PTKP) threshold in 2027 will not benefit workers at the beginning of the year. The government is still discussing the adjustment amount and calculating its impact on both public purchasing power and state revenue.
Coordinating Minister for Economic Affairs Airlangga Hartarto stated that the discussion on the policy has not yet been finalized. Therefore, the PTKP increase will not take effect in January 2027.
"The PTKP policy is indeed planned to take effect next year, but the discussions are not yet finalized. Therefore, its implementation will not begin in January 2027 and will likely only be carried out afterwards," Airlangga said during a press conference in Jakarta on Thursday (Nov 5, 2026).
Previously, on October 1, 2026, Airlangga mentioned that the government was calculating the PTKP adjustment by considering accumulated inflation since 2016. Deputy Finance Minister Juda Agung also stated on October 9 that the plan was still being reviewed in depth.
The government is also considering the impact of a PTKP increase on public purchasing power, including the possibility of linking the non-taxable income threshold to the provincial minimum wage (Upah Minimum Provinsi/UMP).
Currently, the PTKP for individual taxpayers is set at IDR 54 million per year, or equivalent to IDR 4.5 million per month. This provision refers to the Minister of Finance Regulation (PMK) Number 101/PMK.010/2016 concerning Adjustments to the Amount of Non-Taxable Income, which has remained unchanged for about a decade.
Based on these provisions, the PTKP of IDR 54 million applies to individual taxpayers, with an additional IDR 4.5 million for married taxpayers and IDR 4.5 million for each dependent, up to a maximum of three dependents.
The PTKP adjustment has drawn attention because rising prices of goods and services over the past decade may have eroded the purchasing power of workers' incomes. By raising the non-taxable income threshold, the government can reduce the portion of income that serves as the basis for tax calculation.
However, the policy also affects state revenue. The higher the PTKP threshold, the less taxpayer income is included in the calculation of Taxable Income (PKP).
Implications of the PTKP Increase
Conceptually and in the final calculation (the December tax period or annual tax return/SPT), PTKP is a deduction from an individual taxpayer's net income before income tax (PPh) is calculated. This net income is obtained after gross income is reduced by allowable deductions, such as occupational expenses and pension contributions.
However, following the enactment of Government Regulation (PP) Number 58 of 2023 and Minister of Finance Regulation (PMK) Number 168 of 2023, the monthly Article 21 Income Tax (January–November) deduction mechanism has now been simplified. The monthly tax deduction no longer subtracts PTKP manually, but directly multiplies gross income by the average effective rate (tarif efektif rata-rata/TER). Under this system, the amount and status of a taxpayer's PTKP are directly integrated into the rate categories (TER A, B, or C).
Meanwhile, the remaining income after deducting PTKP (calculated in the final tax period) becomes taxable income subject to progressive rates based on the Law of Harmonization of Tax Regulations (UU HPP). The rates are set at 5% for taxable income up to IDR 60 million, 15% for the portion above IDR 60 million up to IDR 250 million, 25% for the portion above IDR 250 million up to IDR 500 million, 30% for the portion above IDR 500 million up to IDR 5 billion, and 35% for the portion above IDR 5 billion.
Thus, the planned PTKP increase could provide significant tax relief for workers. In monthly deductions, a PTKP increase could shift taxpayers to a lower TER bracket. Meanwhile, in the year-end calculation, this will directly reduce the portion of income subject to progressive rates.
However, the benefits of the PTKP increase will not be felt evenly. The amount of tax reduction depends on net income, marital status, number of dependents, and each taxpayer's tax rate bracket.
Workers with incomes below the current PTKP threshold will not receive direct benefits because they have no obligation to pay income tax. The informal worker group that is unrecorded in the tax system will also not automatically benefit from the policy.
On the other hand, increasing PTKP could reduce state income tax revenue. As of August 2026, Article 21 Income Tax contributed approximately 12.2% of total tax revenue.
Nevertheless, a decrease in the number of taxpayers with taxable income does not necessarily mean tax revenue will drop in the same proportion. The impact depends on taxpayers' income distribution, family status, tax rate brackets, and the adjustment amount set by the government.
To date, no official estimates are available on the potential loss of state revenue from the planned PTKP increase. Therefore, the government needs to consider the fiscal consequences before establishing a new threshold.
Considerations for PTKP Increase
One option the government is considering is to link PTKP to UMP. However, both instruments have different functions and scopes.
The minimum wage is the lowest wage limit that employers must pay workers and is set by the regional governor. The amount varies by region based on economic conditions and applicable regulations.
PTKP, by contrast, is an income threshold used to calculate income tax for individual taxpayers and applies nationwide.
Therefore, if the government utilizes UMP as a reference for PTKP adjustments, clarity regarding the mechanisms and indicators used is required so that wage differences across regions do not create issues in implementation.
Furthermore, PTKP cannot be equated with gross income. A worker's gross income must still be reduced by allowable deductions before being compared against the PTKP threshold to determine the amount of taxable income.
Cumulative inflation since 2016 is one of the considerations in determining the PTKP adjustment. Additionally, the government must also consider wage developments, the cost of living, and the state's fiscal capacity.
In the 2024 OECD Economic Survey of Indonesia, the Organization for Economic Cooperation and Development (OECD) noted that Indonesia's PTKP is equivalent to about 65% of its gross domestic product (GDP) per capita and recommended lowering the PTKP to broaden the tax base.
This recommendation reflects differing considerations between efforts to maintain public purchasing power and the necessity to bolster state revenue.
Therefore, the PTKP adjustment should be supported by transparent calculations of fiscal impact, including the distribution of benefits by income group and family status. The government may also consider a periodic evaluation mechanism so that the non-taxable income threshold remains relevant to economic developments.
Additionally, an increase in PTKP must be differentiated from assistance programs for low-income workers. This is because groups with no obligation to pay income tax will not receive direct benefits from an increase in the non-taxable income threshold.
The government needs to consider other purchasing power protection instruments that are more accurately targeted at groups that do not experience a reduction in income tax burdens. A PTKP increase is not only about changing the income threshold exempt from tax but also about balancing the protection of workers' purchasing power with the sustainability of state revenue.
Also Read:
Rethinking Indonesia’s Non-Taxable Income Threshold
2027 Tax Incentive Package: Income Tax, Tax-Free Threshold, VAT
Understanding SP2DK: Purpose, Process, and How to Respond
Writer: Fiorentina Renata Trixie | Editor: Thomas Rizal
