PPh 21 TER Scheme: The New Way to Withhold Salary Tax (With Example)
Since 2024, salary PPh 21 is withheld using the Average Effective Rate (TER). Understand categories A/B/C, the December true-up surprise, and a worked example so payroll stays correct.
Since 1 January 2024, the way employee salary tax (PPh Article 21) is withheld has changed. Through Government Regulation 58/2023 and MoF Regulation 168/2023, the government introduced the Average Effective Rate (TER — Tarif Efektif Rata-rata). Many payroll staff—and employees—are puzzled: “Why does my tax deduction differ each month, and why does December balloon?” This article explains it.
What is TER and why was it introduced?
Previously, computing monthly PPh 21 was complex: you projected annual income, deducted occupational costs and the non-taxable allowance (PTKP), then applied progressive rates. TER simplifies this into one step for the January–November periods:
Monthly PPh 21 = that month’s gross income × TER rate
Important: TER is not a new or extra tax. It is merely a monthly withholding method. Your total annual tax is still computed using the progressive Article 17 rates—reconciled in December.
Three TER categories (based on PTKP status)
The TER rate is set by the employee’s PTKP (non-taxable income) status:
| Category | PTKP status | 0% up to (monthly gross) |
|---|---|---|
| A | TK/0, TK/1, K/0 | ≤ Rp 5.4 million |
| B | TK/2, K/1, TK/3, K/2 | ≤ Rp 6.2 million |
| C | K/3 | ≤ Rp 6.6 million |
The higher the monthly income, the higher the TER percentage (tiered, up to 34%). The exact percentage per tier is in the TER Table appended to PMK 168/2023.
A sharp example: Rp 8 million salary, TK/0 status
A single employee with no dependents (TK/0) earning Rp 8,000,000/month falls into Category A. Per the TER Table, this tier is taxed at 1.5%:
Monthly PPh 21 = Rp 8,000,000 × 1.5% = Rp 120,000/month (January–November)
Simple—no need to compute occupational costs and PTKP every month.
Why can the December deduction “surprise” you?
This is the part that often sparks complaints. In the final tax period (December), the employer recalculates the whole year’s PPh 21 using the progressive Article 17 rates:
| Annual taxable income tier | Rate |
|---|---|
| up to Rp 60 million | 5% |
| Rp 60 million – 250 million | 15% |
| Rp 250 million – 500 million | 25% |
| Rp 500 million – 5 billion | 30% |
| above Rp 5 billion | 35% |
This annual Article 17 figure is reduced by the total TER withheld in January–November. The difference is deducted (or refunded) in December. If income varies—bonuses, holiday allowance (THR), or a mid-year raise—the December deduction can exceed a normal month. That is not over-withholding, but a year-end reconciliation.
What employers should watch
- Verify each employee’s PTKP status—wrong category means wrong withholding.
- Use the TER Table consistently for Jan–Nov and Article 17 for December.
- Pay and file the monthly PPh 21 return on time to avoid interest penalties.
- Educate employees about the December pattern to prevent misunderstandings.
Miscalculating PPh 21 risks audit corrections and employee complaints alike. The Mandiri Pajak team helps prepare your payroll computation and reporting correctly—see our tax reporting service or get a consultation. Getting tax right brings peace of mind.