Income Tax Exemption for Salaries up to 10 Million Rupiah

The government announced in October 2025 that PPh 21 will be exempted for formal‑sector employees earning a gross salary of up to 10 million rupiah per month. Employers will no longer withhold the tax and the cost will be borne by the state under the “Ditanggung Pemerintah” scheme. The exemption is set to take effect from the following payroll period.

The measure aims to boost household purchasing power; a worker earning 8 million rupiah is expected to see net take‑home pay rise by about 150‑250 thousand rupiah depending on family dependents. Yet the 2023 BPS data show average household spending in Jakarta at 14.8 million rupiah, so the gain remains modest. The policy covers only formal employees, ignores regional cost‑of‑living differences and leaves the informal sector—over half of the labour force—unbenefited.

While the exemption provides short‑term relief for millions, the loss of tax revenue could reach trillions of rupiah if maintained long term. Analysts note that without price controls, productivity gains, or targeted subsidies, the impact on real purchasing power will be limited. The government is likely to treat the exemption as an initial step rather than a permanent solution.