Full Cycle: A Guide to PPh 21 Calculation for Permanent Employees from January to December

For permanent employees working fully from the beginning of the year (January) to the end of the year (December), the Income Tax Article 21 (PPh 21) calculation scheme has undergone a fundamental transformation since the Average Effective Rate (TER) regulation came into effect on January 1, 2024. This change divides the calculation method into two distinct phases within one tax year: the monthly phase (January–November) and the last tax period phase (December).

Understanding this flow is crucial to avoid confusion as to why tax deductions fluctuate each month and why there is often a drastic spike or drop in salary deductions in December.

Phase 1: Tax Period January to November (TER Mechanism)

In the first eleven months, tax calculation is made very simple. Employers no longer need to manually calculate net income, office costs, or non-taxable income (PTKP) every month. The keys are only two: Monthly Gross Income and TER Category.

Gross income is the total amount of money received by the employee in that month, including basic salary, allowances, overtime pay, and bonuses/THR. This figure is then multiplied by the percentage rate listed in the TER table (Category A, B, or C) according to the employee's PTKP status at the beginning of the year.

Phase 2: Last Tax Period/December (Article 17 Mechanism)

December (or the month the employee stops working/retires) is the moment of "actual calculation." In this period, the employer is required to recalculate the total PPh 21 that should be owed for the full year using the progressive rates of Article 17 of the Income Tax Law.

The steps are:

• Calculate total Annual Gross Income (January–December).
• Deduct Office Costs (max 6 million/year for active employees) or Pension Costs (max 2.4 million/year for pensioners), as well as pension/old-age contributions paid by the employee.
• The result (Net Income) is reduced by PTKP to obtain Taxable Income (PKP).
• PKP is multiplied by the progressive rates of Article 17.
• The annual tax result is reduced by the total tax already withheld from January to November (using TER). The difference is the tax to be paid in December.

Case Study: Mr. A (Permanent Employee)

Let's simulate the calculation for Mr. A who works at PT Z.

• • Status: Married, no dependents (K/0).
• • TER Category: TER A.
• • Salary & Allowances (Regular): Rp30,080,000 per month.
• • THR (June): Rp30,000,000 (causing June gross income to spike).
• • Bonus (December): Rp60,000,000.
• • Annual Deductions (Office Costs, Pension Contributions, Zakat): Total Rp9,600,000.

Step 1: Calculate Tax Jan to Nov (Using TER)

Every month, PT Z looks at the TER A table based on Mr. A's gross income.

• January (Salary Rp30.08 Million): TER Rate 13%. Tax = Rp3,910,400.
• June (Salary + THR = Rp60.08 Million): Because gross income rises, the TER rate also rises to 20%. June Tax = 20% x Rp60,080,000 = Rp12,016,000.
• Total Tax Withheld (Jan-Nov): Let's assume the total is Rp50,120,000.

Step 2: Calculate December Tax (Last Tax Period)

In December, the calculation returns to the Article 17 method (general rate).

• • Annual Gross Total: Rp450,960,000 (Annual Salary + THR + Bonus).
• • Net Income: Rp450,960,000 - Rp9,600,000 (Deductions) = Rp441,360,000.
• • Taxable Income (PKP): Rp441,360,000 - Rp58,500,000 (PTKP K/0) = Rp382,860,000.
• • Annual Tax Payable (Progressive Rate):
  5% x 60m = 3,000,000
  15% x 190m = 28,500,000
  25% x 132.86m = 33,215,000
  Total Annual Tax = Rp64,715,000.

Step 3: Determine December Deduction

• Annual Tax (Article 17 Calculation): Rp64,715,000
• Tax already withheld (Jan-Nov via TER): (Rp50,120,000)
• PPh Article 21 for December: Rp14,595,000.

Conclusion

This new method shifts the administrative burden to December. Permanent employees and pensioners need to understand that TER is merely a tax installment method. The actual underpayment or overpayment will be settled in the last tax period, where all deduction components (such as office costs and pension contributions) are finally fully accounted for to obtain the precise tax value.

Regulatory References:

• Government Regulation Number 58 of 2023 concerning Article 21 Income Tax Withholding Rates on Income in Connection with Work, Services, or Activities of Individual Taxpayers.
• Minister of Finance Regulation Number 168 of 2023 concerning Implementing Guidelines for Withholding Tax on Income in Connection with Work, Services, or Activities of Individual Taxpayers.
• Book "Cermat Pemotongan PPh Pasal 21/26" (Directorate General of Taxes, 2024).