Exclusion On Gross Income Ol

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EXCLUSIONS ON GROSS INCOME (The income which is not part of Gross Income)

1. PROCEEDS OF LIFE INSURANCE POLICY - PAID TO THE HEIRS OR BENEFICIARIES UPON the DEATH
OF THE INSURED WHETHER IN A SINGLE SUM OR OTHERWISE. IF SUCH AMOUNT IS HELD BY
THE INSURER UNDER AN AGREEMENT TO PAY INTEREST THEREON, THE INTEREST IS PART OF
GROSS INCOME.

Sunlife, Manu life, Pru Life, insular life, Phil am

AMOUNT FROM INSURANCE COMPANY UPON THE DEATH RECEIVED BY HEIRS – EXCLUSION -
NOT TAXABLE
IF YOU PUT THE MONEY IN A BANK OR INTEREST EARNING ACTIVITY – interest is TAXABLE

2. RETURN OF INSURANCE PREMIUM RECEIVED BY THE INSURED DURING THE TERM OF


INSURANCE OR UPON SURRENDERING THE CONTRACT. Return of capita l-20 YEARS
PREMIUM - 200,000 NOT TAXABLE/EXCLUSION
INTEREST - 20,000 TAXABLE OUTLIVED

3. GIFT, BEQUEST OR DEVISE AND INHERITANCE


GIFT, BEQUEST, DEVISE = DONOR’S TAX BASED ON LAW ON DONATION (DONATION)
INHERITANCE………………. ESTATE TAX – BASED ON SUCCESSION LAW (MANA)

HIDiLYN DIAZ -GOLD MEDALIST SA OLYMPIC


P10 MILLION (RAMON ANG, SMC) + FRANCHISE OF CHICKEN - DONOR’S TAX - P600,000-
DONORS TAX
10M (GOV’T) (PHIL. OLYMPIC COMMITTEE) EXCLUSION – PRIZE- EXEMPTED
14 MILLION CONDO -SUBJECT TO DONOR’S TAX-megaworld-ANDREW TAN
P5MILLIOM (ROMERO) SUBJECT TO DONOR’S TAX
10M PANGLINAN SUBJECT TO DONOR’S TAX
CAR FROM FOTON SUBJECT TO DONOR’S TAX
MALACANANG-DUTERTE PRIZE -EXclusion
HOUSE IN TAGAYTAY – PART OF THE PRIZE - EXEMPTED
SENATE- EXEMPTED
HOUSE AND LOT- IF STATED PRIZE - EXEMPTED -govt
LIFETIME TRAVE FREEFLY-DONO’R TAX

4. COMPENSATION FOR PERSONAL INJURIES, OR SICKNESS PLUS THE AMOUNT OF DAMAGES


WHETHER BY SUIT OR AGREEMENT ON ACCOUNT OF SUCH INJURIES AND SICKNESS.
DAMAGES – EXCLUSION-NOT TAXABLE
RECOVERY OF LOSS OF INCOME – NOT AN EXCLUSION - TAXABLE

5. INCOME EXEMPT UNDER TREATY BINDING UPON THE GOVERNMENT OF THE PHILIPPINES.
EX. LAGUNA ECONOMIC ZONES – EXCLUSION OR EXEMPT IN TAX
EMPLOYEE OF CONSULAR OFFICES, EMBASSY

6. RETIREMENT BENEFITS, PENSION, GRATUITIES AND OTHER BENEFITS RECEIVED by EMPLOYEES


FROM PRIVATE AND GOVERNMENT ENTITIES.
MANDATORY RETIREMENT AGE
GOVERNMENT EMPLOYEE - RETIREMENT AGE -65 YEARS OLD
PRIVATE EMPLOYEE ………… 65 YEARS OLD
POLICE AND MILITARY……… 56 YEARS OLD
JUDGES……………………………..70 YEARS OLD
NOT RELATED TO STUDY
PRIEST……………………………….75 YEARS OLD
SANTO PAPA……………………..DEATH

RETIREMENT BENEFITS, PENSION, GRATUITIES ARE NOT TAXABLE, IF THE RETIRING EMPLOYEES
IS 50 YEARS OLD AND ABOVE, WHO WORKS IN THE COMPANY FOR AT LEAST 10 CONTINOUOS
YEARS AND AVAILED OF RETIREMENT ONLY ONCE.

OPTIONAL RETIREMENT - AGE BELOW MANDATORY RETIREMENT AGE.

REQUIREMENT IN ORDER A RETIREMENT PAY IS NOT TAXABLE OR EXCLUSION ON GROSS


INCOME
1. THE RETIREE MUST BE 50 YEARS OLD AND ABOVE
2. WORK IN THE COMPANY FOR AT LEAST 10 YEARS
3. AVAILED OF RETIREMENT PAY ONLY ONCE.

EX. NGRETIRED AT THE AGE OF 49 AFTER WORKING FOR 28 YEARS – RETIREMENT BENEFIT
IS TAXABLE USING THE TAX TABLE
YOU STARTED WORKING AGAIN AT THE AGE OF 50 AND RETIRED AT THE AGE OF 65 –THE
2ND RETIREMENT PAY IS NOT TAXABLE.

RETIREMENT PAY- ONE MONTH SALARY FOR EVERY YEAR OF SERVICE

EXAMPLE PROBLEM
MR. A, AN EMPLOYEE OF MAKATI, RETIRED FROM HIS JOB AND GET THE FOLLOWING
COMPENSATIONS AND BENEFITS FOR THE YEAR AFTER 30 YEARS OF WORKING:
GROSS COMPENSATION INCOME …………………………………….P 800,000
OTHER INCOME:
A) INTEREST INCOME FROM BANK……………………………… 40,000 FINAL TAX
B) RETIREMENT BENEFITS…………………………………….. 3,000,000

a. How much income tax if the employee is below 50 years old to be deducted by
employer from his retirement pay? P1,066,000
P800,000 + P3,000,000 = P3,800,000 -2,000,000 x.32% + P490,000 = P1,066,000
b. How much the income tax if the RETIRING employee is 50 years and above?
P130,000 FOR P800,000 GROSS COMPENSATION. (CHECK TAX TABLE FOR 800,000)

Retirement below 50 years old-----------------1,066,000


Retirement 50 years old and above……………….130,000

When the retiree is 50 years old and above, the retirement pay becomes an exclusion on gross income.

This benefit is applicable only if the employer maintained a reasonable Retirement PENSION Benefit
Plan.

RETIREMENT PAY COMPUTATION - One month salary for every year of service.

30,000 per month x 30years= 900,000


60,000 per month x 30years= 1,800,000
100,000 per month x 30 years= 3,000,000

Yung maliit na kompanya binibigyan lang ang employee ng pabuya matapos


magrabaho ng higit sa sampung taon AS RETIREMENT PAY - lahat ay taxable
REGARDLESS OF AGE.

7. Any amount received from employer by an officials or employees because of the separation of
such officials and employees from the service of the of the employer due to death, sickness, or
other physical disability or for any cause beyond the control of the said official and employees.
Example: Separation pay
a. SEPARATION PAY OUT OF Resignation – taxable -*resignation= no benefits
b. Separation PAY due to physical and mental condition- exclusion AND not taxable
c. Separation PAY due to work redundancy – exclusion AND not TAXABLE
d. Separation PAY due to death – exclusion, not taxable
e. Separation PAY due to work stoppage because of pandemic – exclusion OR not taxable
f. Separation PAY due to tardiness and absences - taxable (non-exclusion)
g. Separation PAY due to immoral act committed in the office – taxable (non-exclusion)

8. Social Security benefits, gratuities, pension, retirement and other similar benefits received by
resident or non-resident citizen of the Philippines who have come to reside permanently in the
Philippines from foreign government agencies and other institution whether private or public.

9. Payment or benefits due or to become due to any person residing in the Philippines under the
laws of US administered by the United States Veterans Administration. Monthly pension ng
isang beterano ng digmaan (2nd world war)
10. Benefits enjoyed under Social Security System FOR PRIVATE EMPLOYEEs in the Phil.
Benefits in the SSS:
a. Monthly pension after working for 120 months OR 10 YEARS
b. Burial benefits
c. Sickness benefits
d. Disability benefits
e. MATERNITY BENEFITS 105 DAYS

11. Benefits received or enjoyed from GSIS FOR GOVERNEMT EMPLOYEEs in the Phil.
Government Service Insurance system –all government employees except policemen and AFP
Military soldier
Benefit - Monthly pension 20,000

12. Income derived from investment in the Philippines in the form of loans, stock, bonds or other
domestic securities or from interest on deposit in banks in the Philippines by (1) foreign
government; (2) financial institution owned and controlled or enjoying refinancing from foreign
government and (3) international regional financial institution established by foreign
government. Income of I.M.F.- exclusion, pautang ng China sa Pilipinas- INTEREST

13. Income derived from public utility or from the exercise of any essential government function
accruing to the government of the Philippines or to any political subdivision thereof.
BARANGAY, MUNICIPALITY, CITY AND PROVINCIAL GOVERNMENT, NATIONAL GOV’T.

GOVT. OWNED AND CONTROLLED CORP. (GOCC)- INCOME OF THESE AGENCIES ARE TAXABLE-
BSP, LAND BANK, DBP, PDIC, PAGCOR, SSS, GSIS. Taxable

14. Prizes and awards made primarily in recognition of religious, charitable, scientific, educational,
artistic, literary or civic achievement but only (1) the recipient was selected without any action
on his part to enter the contest or proceeding; and (2) The recipient is required to render
substantial future services as a condition for receiving such prize or award:

Miss Universe prize – PRIZE taxable


Nobel Peace Prize 2021- not taxable-WORLD, MARIA RESSA OF RAFLER, 1.140,000 Dollars or
57,000,000 pesos. MOTHER THERESA OF CALCUTA INDIA
Ramon Magsaysay Award – Not taxable-ASIAN COUNTRY-50,OOO DOLLARS; P2,500,000
MIRRIAM DEFENSOR SANTIAGO-COMMISIONER OF IMMIGRATION
FAMAS Best Picture - Not taxable, P500,000
EAT BULAGA-BAWAL JUDGEMENTAL-THE PRIZE IS TAXABLE - KASI NAPAGOD, NAG-AUDITION

15. Prizes and awards granted to athletes local and international competition and tournaments
whether held in the Philippines or abroad, sanctions by National Sport Association in the
Philippines.
Winnings of Pacquiao VS Maywether fight – Taxable
PAY PER VIEW
Paeng Nepomuceno games-not taxable- may pahintulot ng NationaL Bowling Association of the
Phil.
Bata Reyes (Billiard King) – not taxable –may pahintulot ng National Billiard Association of the
Philippines

16. Gross benefit received by official and employees of public and private firms as 13 th month pay
and other forms of benefits with exclusion of P90,000 in a year (TRAIN LAW)
13TH MONTH PAY, 14TH MONTH PAY, 15TH MONTH PAY; CHRISTMAS, BONUS, INCENTIVE PAY
PROFIT SHARING; ANNIVERSARY BONUS, FOUNDATION BONUS
120,000 - 90,000= 30,000

JANUARY 25,000………………….. 3,000


FEB, 30,000…………………… 5,000
MARCH 23,000……………………3,000
APRIL, 32,000………………… 6,000
MAY 25,000………………… 4,000
JUNE 20,000………… ? ENDO
155,000 21,000

COMPUTE THE TAX DUE


GROSS COMPENSATION INCOME 155,000
TAX TABLE…………………………………….. 0
TAX DUE………………………………………………0
LESS: TAX WITHHELD………………………21,000
TAX REFUND………………………………….(21,000)
13TH MONTH PAY= 155,000/12MONTHS -ONLY BASIC SALARY (EXCLUDING OVERTIME)
TAX REFUND

DCI

..20,833 X 12=250,000
22,000
24,000
30,000
35,000

EXAMPLE PROBLEM
AN EMPLOYEE HAD THE DATA ON INCOME
GROSS COMPENSATION INCOME …………………………………………1,000,000
13TH MONTH pay ……………………………………………………………………… 80,000
CHRISTMAS BONUS…………………………………………………………………….20,000
PROFIT SHARING…………………………………………………………………………15,000

HOW MUCH INCOME TAX SHOULD BE DEDUCTED AND WITHHELD BY THE EMPLOYER in a year?
Answer
GCI………………………………………………………………… 1,000,000
13TH MONTH pay………………………………. 80,000
CHRISTMAS BONUS…………………………….20,000
PROFIT SHARING…………………………………15,000
TOTAL……………………………………………….115,000
Less: Exclusion…………………………………….90,000 25,000
Gross income ………………………………………………….1,025,000 NTI (NET TAXABLE INCOME)
ITD (1,025,000-800TX 30%+P130,000……………P 197,500

17. GSIS, SSS, PAG-IBIG, PHILHEALTH PREMIUMS AND UNION DUES OF INDIVIDUAL.
AN EMPLOYEE HAD THE DATA ON INCOME
GROSS COMPENSATION INCOME …………………………………………1,000,000 (TOTAL SALARY)
SSS, PHILHEALTH, PAGIBIG AND UNION DUES………………………… 15,000 (statutory deduction)
13TH MONTH………………………………………………………………………………80,000
CHRISTMAS BONUS……………………………………………………………………20,000
PROFIT SHARING……………………………………………………………………… 15,000
HOW MUCH INCOME TAX SHOULD BE DEDUCTED AND WITHHELD BY THE EMPLOYER?
answer
GCI……………(1,000,000 - 15,000)…………………… P 985,000
13TH MONTH……………………………………….80,000
CHRISTMAS BONUS…………………………….20,000
PROFIT SHARING…………………………………15,000
TOTAL……………………………………………….115,000
Less: Exclusion…………………………………….90,000 25,000
Gross income …………………………………………………. 1,010,000
ITD (1,010T-800TX 30%+P130,000……………………… 193,000

HOW MUCH THE TOTAL EXCLUSIONS IN THE PROBLEM? P355,000 (90,000+15,000+250,000)

18. GAINS REALIZED FROM THE SALE, EXCHANGE OR RETIREMENT OF BONDS, DEBENTURES, OR
OTHER CERTIFICATE OF INDEBTEDNESS WITH MATURIY OF MORE THAN 5 YEARS.

BONDS - CERTIFICATE OF INDEBTEDNESS - PAGBUMULI K NG BONDS IBIG SABIHIN NGPAUTANG


KA SA CORP. OR GOBYERNO. THERE IS CREDITOR AND DEBTORS EXIST.
CREDITOR- ONE WHO BOUGHT BONDS
DEBTOR –refers to CORP OR GOVERNMENT WHO ISSUED BONDS
19. MINIMUM WAGE EARNER - P570/DAY OLD LAW RA 8424
1 TRILLION= 1BILLION X 1,000
5 TRILLION- 5,000 BILLION

20. FIRST P250,000 GROSS COMPENSATION INCOME (EMPLOYEE) UNDER TRAIN LAW-TAX TABLE

21. FIRST P250,000 OF SALES UNDER THE 8% INCOME TAX SCHEME. (NEGOSYANTE) TRAIN

UNDER TRAIN LAW


1. HAVING A GROSS INCOME OR GROSS SALES OF 3M AND BELOW- 8% INOME TAX SCHEME
NO BUSINESS TAX
GROSS SALES 2.5M-250,000X 8%- QUARTERLY INCOME TAX
2. HAVING A GROSS SALES OR GROSS RECEIPT OF EXCEEDING 3MILLIOM IN A YEAR- BUSINESS
TAX –VALUE-ADDED TAX (MONTHLY) AND INCOME TAX (QUARTERLY) IS BASED ON NET
INCOME(MONTHLY) (BASED ON TAX TABLE)

TRADING-GROSS SALES-SALES INVOICE


SERVICE-GROSS RECEIPT-OFFICIAL RECEIPT-MERCURY (TRADING) THIS IS YOUR OFFICIAL
RECEIPT.

NEXT MEETING continuation of EXCLUSION ON GROSS INCOME

1. ASSIGNMENT DE MINIMIS BENEFITS. (SMALL BENEFITS) ENUMERATE


A. RICE SUBSIDY
2. OTHER EXCLUSION ON GROSS INCOME

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