Many employees are often confused when it comes to taxes, especially regarding PPh 21. Common questions include:
- How do I calculate PPh 21?
- How much of my salary is deducted for PPh 21?
- How can I ensure my tax deductions are correct?
- What are the components of the deduction?
At Setlary, we aim to answer all your questions about PPh 21, ensuring you gain clarity and confidence in understanding your taxes.
What is PPh 21?
PPh 21 is a tax levied on individual income, such as salaries, honorariums, allowances, or other payments considered income. The employer directly deducts this tax each month before the employee receives their salary.
This tax system uses a progressive rate, meaning the higher the taxable income, the higher the tax rate applied. The policy aims to create tax fairness for each individual’s income level.
Several key components affect the amount of tax you need to pay.
Components of PPh 21
1. Gross Income (Penghasilan Bruto)
Gross income is the total income received before deductions, and it becomes net income after deductions. Components of gross income include:
- Position Allowances (Biaya Jabatan)
- Pension Contributions (Iuran Pensiun)
- BPJS Health and Employment Contributions (BPJS Kesehatan dan Ketenagakerjaan)
2. Non-Taxable Income (PTKP)
PTKP is the income threshold that is not subject to tax. The amount is based on marital status and number of dependents.
- Single (TK/0): Rp 54 million per year
- Married without dependents (K/0) : Rp58.5 million per year
- Married with 1 dependent (K/1) : Rp63 million per year
- Married with 2 dependents (K/2 : Rp67.5 million per year
- Married with 3 dependents (K/3 : Rp72 million per year
3. Taxable Income (PKP)
PKP is net income after deducting PTKP, which is the basis for calculating the tax based on progressive rates.
4. Progressive Tax Rates
PPh 21 follows progressive tax rates: the higher the taxable income, the higher the tax rate applied:
- 5% – Income up to Rp 60 million per year
- 15% – Income > Rp 60 million – Rp 250 million per year
- 25% – Income > Rp 250 million – Rp 500 million per year
- 30% – Income > Rp 500 million – Rp 5 billion per year
- 35% – Income > Rp 5 billion per year
5. Tax Credit (Kredit Pajak)
Tax credits are deductions for taxes already paid, such as through employer deductions, which will reduce the amount of tax to be paid at the end of the year.
Read More: Understanding The Difference between Nett Pay vs. Gross Pay
Legal Basis for PPh 21
PPh 21 is regulated by several laws:
- Law No. 36 of 2008
- Law No. 7 of 2021 on Tax Regulation Harmonization (UU HPP)
- PP No. 68 of 2009: Regulates PPh on severance pay, pension benefits, old-age allowances, and retirement funds paid in lump sums.
- PP No. 41 of 2016: Regulates PPh 21 for employees based on specific criteria.
- Ministry of Finance Regulations (PMK): These regulations further clarify the technical details of PPh as established by the Ministry of Finance.
Income Subject to PPh 21
PPh 21 applies to various types of income, including:
1. Employee Income
- Salaries: Fixed compensation for work.
- Allowances: Transportation, meal, and other allowances.
- Bonuses or Incentives: Performance-related payments.
- Overtime Pay: Compensation for extra hours worked.
2. Non-Employee Income (Freelancers)
- Honorariums: Payments for specific tasks or temporary work.
- Professional Services: Income from consulting, legal, or design services.
- Commissions: Earnings based on sales or other results.
3. Pension Income
- Pension Funds: Regular payments received after retirement.
- Retirement Benefits: Lump-sum or periodic payments.
4. Severance or Compensation
- Severance Pay: Compensation for employment termination.
- Other Rewards: Payments for years of service or other merits.
5. Operational Income
Income linked to work-related activities, such as travel or meal allowances.
Exemptions from PPh 21
Some income is exempt from PPh 21, including:
- Income below the PTKP threshold
- Special benefits such as pension payments
- Income from specific exemptions by government regulations
- Reimbursements for operational expenses, not treated as additional income
- Charitable donations
Read More: Understanding the 2025 Minimum Wage (UMP) Formula
The Average Effective Rate (TER)
In accordance with Government Regulation No. 58/2023, the average effective rate (TER) is applied to simplify the monthly withholding of Income Tax (PPh 21) based on gross income. This TER is divided into several categories depending on an individual’s Non-Taxable Income (PTKP) status.
Monthly Effective Rate (PTKP Categories TK/0 and TK/1) Example TER rates for PTKP categories of Rp54 million (TK/0) and Rp58.5 million (TK/1 & K/0):
- Gross income up to Rp5,400,000: 0%
- Gross income between Rp7,500,000–Rp8,550,000: 1.5%
- Gross income between Rp10,700,000–Rp10,500,000: 3%
- Gross income above Rp12,500,000: up to 5%
Effective Rate for Higher Monthly Income (Categories K/1 and K/2) For higher gross income (PTKP Rp63 million–Rp67.5 million):
- Gross income up to Rp6,200,000: 0%
- Gross income between Rp7,300,000–Rp9,200,000: 1%
- Gross income above Rp19,750,000: up to 9%
Example Calculation of PPh 21
Here’s an example for a single employee (with NPWP) to demonstrate how PPh 21 is calculated:
- Basic Salary: Rp10,000,000 per month
- Transport Allowance: Rp1,000,000 per month
- Meal Allowance: Rp1,000,000 per month
- Total Gross Income: Rp12,000,000 per month
- Position Allowance (5% of gross income, max Rp 500,000): Rp500,000
- Net Income: Rp11,500,000 per month
- Annual Net Income: Rp11,500,000 x 12 = Rp138,000,000
- PTKP for Single (TK/0): Rp54,000,000 per year
- Taxable Income (PKP): Rp138,000,000 – Rp54,000,000 = Rp84,000,000
- Tax Calculation:
- 5% x Rp50,000,000 = Rp2,500,000
- 15% x Rp34,000,000 = Rp5,100,000
- Total PPh 21 per year: Rp2,500,000 + Rp5,100,000 = Rp7,600,000
- Monthly PPh 21: Rp7,600,000 / 12 = Rp633,333
As a result, the employee will pay a monthly PPh 21 of Rp633,333.
The Importance of Understanding PPh 21
Understanding PPh 21 is crucial for both employees to know their net salary, and for employers to ensure compliance with tax regulations. Unfortunately, tax deductions can often feel burdensome, impacting finances.
This is where Earned Wage Access (EWA) from Setlary can be a solution. With EWA, employees can access a portion of their salary before payday, at the end of the month. This helps alleviate sudden financial pressures, even when tax deductions seem high.
With Setlary’s EWA, you get more control over your finances, making tax payments less of a barrier to a more stable future. Understand your rights and take control of your financial planning with confidence.
