Indonesia considers raising personal income tax allowance
The current allowance is Rp54 million annually. The Finance Ministry is examining a possible adjustment in 2027, with its effect on purchasing power under review.
Discussions on raising Indonesia’s tax-free income threshold remain under way, Deputy Coordinating Minister for Economic Affairs Dradjad Hari Wibowo told CNBC Indonesia on 30 October 2026. The existing threshold exempts Rp54 million in annual income, equivalent to Rp4.5 million monthly.
Relevant bodies in the House of Representatives would take part in the discussions, Dradjad said. He gave no proposed amount or implementation date and did not identify which parliamentary commissions would be involved.
On 1 October, Deputy Finance Minister Juda Agung said his ministry was studying whether to adjust the allowance in 2027. The government was still assessing the policy’s impact, particularly on purchasing power.
The proposal emerged during discussions about economic stimulus and other government programmes at Jakarta’s Merdeka Palace on 30 September 2026.
Separately, Coordinating Minister for Economic Affairs Airlangga Hartarto had said the government was considering bringing the allowance into line with provincial minimum wages. The intention, he said, was to spare workers earning those wages from income tax.
Airlangga illustrated the current rules with a worker earning Rp5 million monthly, or Rp60 million annually. Once the Rp54 million allowance is deducted, Rp6 million remains taxable, he said.
