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Jakarta, Ideatax -- Eid al-Fitr 1446 H is getting near. Shopping centers are getting crowded with people. The streets are also packed with people heading back to their hometowns. Such is the usual routine towards one of the major holidays of Muslims.
The Government has prepared provisions related to religious holiday allowances or Tunjangan Hari Raya (THR) beforehand. Through the Circular Letter of the Ministry of Manpower Number M/2/HK.04/III/2024 dated March 15, 2024, concerning the Implementation of Providing Religious Holiday Allowances in 2024 for Workers and Laborers in Companies, the Government regulates that religious holiday allowances must be given in full and no later than seven days before the religious holiday. Furthermore, the provision stipulates that religious holiday allowances are given to workers who have had a continuous working period of one month or more for both permanent and contract workers.
However, keep in mind that in connection to the religious holiday allowance, there is an income tax that must be paid by employees. Law No. 7 of 1983 concerning Income Tax, as amended by Law No. 7 of 2021 concerning Harmonization of Tax Regulations, stipulates that included as the object of income tax is reimbursement or compensation in connection with work or services received or obtained, including salaries, wages, allowances, honorarium, commissions, bonuses, gratuities, retirement money, or other benefits.
Furthermore, in the Ministry of Finance Regulation No. 168 of 2023 concerning Guidelines for the Implementation of Tax Withholding on Income in Connection with Work, Services, or Personal Activities, the government also regulates that income deducted by Article 21 income tax includes bonuses, holiday allowances, production services, tantiem, gratuities, premiums, and other irregular income. From this perspective, we can see that holiday allowances are income that is subject to income tax.
Regarding the technical deduction of income tax on THR in 2024, there are differences in the calculation procedure compared to the previous year. Starting January 2024, ITA 21 withholding uses an average effective rate mechanism as stipulated in Government Regulation No. 58 and Ministry of Finance Regulation No. 168 of 2023. Thus, with this mechanism, employees' income is deducted from income tax by category and layer of income.
Government Regulation Number 58 of 2023 stipulates that three categories of rates can be used to withhold Income Tax Article 21 as follows:
- Category A rates are used to calculate income tax on employees with non-taxable income status who are not married (TK/0), not married with 1 dependent (TK/1), and married without dependents (K/0).
- Category B rates are used to calculate income tax for employees with non-taxable income status not married with two dependents (TK/2), not married with three dependents (TK/3), married with one dependent (K/1) and married with two dependents (K/2).
- Category C rates are used to calculate Income Tax Article 21 for employees who have PTKP status and are married with three dependents (K/3).
To calculate income tax on salary and THR, several things need to be done by the employer. First, the employer needs to add up the gross income received by employees in that month. Second, the employer multiplies the gross income by the average effective rate according to the category and layer of gross income. Third, the employer withholds Income Tax Article 21 on salaries and THR received by employees. Fourth, the employer reports the deduction in the Periodic Income Tax Return, Article 21, and provides proof of deduction to the employee.
For example, in April 2024, PT ABC gave a salary of Rp35,000,000 and THR of Rp15,000,000 to Mr. X, who is married and has two children. Based on the illustration above, the income tax under Article 21 that must be deducted by PT ABC is as follows:
The details of the TER tariff can be found in the appendix of this article.
