Many people assume that all scholarships are automatically tax-free. This assumption is only partially correct. The regulations do exempt scholarships from the Income Tax object, but the exemption is conditional, and the conditions are not about the amount, but rather the relationship between the giver and the recipient.
The basis is found in Article 4 paragraph (3) of the Income Tax Law, with implementing regulations in PMK 68/PMK.03/2020 established on June 15, 2020. This regulation also revokes PMK 246/PMK.03/2008 along with its amendments PMK 154/PMK.03/2009, so the old references that are still circulating on the internet are no longer valid. As of July 2026, the contact center of the Directorate General of Taxes still refers to PMK 68/2020 as the applicable reference.
Two basic conditions
Article 2 paragraph (3) of PMK 68/2020 only mentions two conditions:
- the scholarship recipient is an Indonesian citizen; and
- the scholarship is used for formal or non-formal education, conducted domestically and/or abroad.
Formal education means a structured and tiered pathway, consisting of primary education, secondary education, and higher education. Non-formal education is a pathway outside of formal education that can be conducted in a structured and tiered manner. Studying abroad is included, as long as the recipient is an Indonesian citizen.
Three relationships that invalidate the exemption
Article 2 paragraph (6) closes the door in three situations:
- the scholarship-giving entity has a business relationship, ownership relationship, or control relationship with the recipient;
- the owner, commissioner, director, or manager of the scholarship-giving entity has a family relationship with the recipient, either by blood or by marriage, in a direct line and/or lateral one degree;
- the individual scholarship giver has a business relationship with the recipient.
If any of these conditions are met, the scholarship becomes subject to Income Tax for the recipient.
Common misconceptions
PMK 68/2020 does not define the terms business relationship, ownership, and control itself. The definitions are found in Article 8 of Government Regulation No. 94 of 2010. Paragraph (2) states that a business relationship occurs when there are routine transactions between both parties. Paragraph (4) links ownership or control relationships to Article 18 paragraph (4) of the Income Tax Law.
Importantly, paragraph (3) of the same article places employment relationships as a separate category, namely relationships in the form of employment, provision of services, or implementation of activities. The bond between a company and its employees falls into this category, not the business relationship category. This means that scholarships given by a company to its own employees can still be exempted, as long as there is no ownership, control, or family ties as mentioned earlier. The definition of scholarship in Article 1 of PMK 68/2020 explicitly mentions employees of the scholarship giver as eligible recipients.
Included and excluded components
Article 3 details the components: education costs paid to schools or educational or training institutions, examination fees, research costs related to the field of study taken, book costs, transportation costs, and/or reasonable living costs according to the location of study.
Note the word reasonable. PMK does not provide a numerical limit and does not offer a table by city. Therefore, reasonableness is a judgment area that you need to support with documentation: scholarship agreements, component details, and proof of payment. Payments that fall outside of this list are not scholarship components, thus not protected by this exemption.
One more thing that is often overlooked is in Article 1. A scholarship is defined as financial support for education provided based on the main considerations of achievement, academic potential, and/or economic limitations. Grants that are not based on these three factors do not change their nature simply because they are renamed as scholarships.
From the giver's side, it is reportedly simpler. Article 2 paragraph (1) emphasizes that scholarship expenses can be deducted from gross income when calculating taxable income.
Sources
- Regulation of the Minister of Finance No. 68/PMK.03/2020 concerning Income Tax Treatment on Scholarships that Meet Certain Requirements and Excess Received or Obtained by Non-Profit Entities, JDIH Ministry of Finance.
- Government Regulation No. 94 of 2010 concerning Calculation of Taxable Income and Payment of Income Tax in the Current Year, Article 8, JDIH Ministry of Finance.
- "Can Employees Receiving Scholarships from Employers Be Subject to Income Tax?", DDTCNews, October 4, 2024.
- "Are Employee Tuition Fees Covered by the Company Subject to Income Tax?", DDTCNews, July 26, 2026.