Income Taxation

Taxation of Individuals

Allowable Deductions
Items or amounts, which the law allows to

be deducted from gross income in order to

arrive at the taxable income.
1. From compensation income
1. Basic personal and/or additional exemptions
2. Premium payments on health and/or
hospitalization insurance
2. From business income
1. Basic personal and/or additional exemptions
2. Premium payments on health and/or
hospitalization insurance
3. Itemized deductions under the Tax Code (Items AJ, Section 34)

Personal Exemptions
The personal, living or family expenses

of the taxpayer.
Kinds of Personal Exemptions
1. Basic personal exemption fifty
thousand pesos for each individual
taxpayer regardless of status.
2. Additional exemption for each

dependent child not exceeding four

children, an additional exemption of

Individual Taxpayers Allowed

Personal Exemptions

1. Citizens
2. Resident Alien
3. Non-Resident Alien
4. Estates and Trusts

Premium Payments on Health and/or

Hospitalization Insurance
The following conditions must be met:
1. The insurance shall be taken by the
individual taxpayer himself for his
family.
2. The amount being claimed shall not
exceed P2,400 a year or P200 a
month per family.
3. The family has gross income of
P250,000 or less for the taxable year.

Taxable Income and Tax Due

Taxable Income: defined as the pertinent

items of gross income less the deductions

and/or personal and additional exemptions,
if any, authorized for such types of income.
Tax Due: The taxable amount or tax base

upon which a tax rate is applied, the

computed income tax amount is to be
remitted to the government.

Taxable Income on ...

Net Compensation Income

Gross Compensation Income

xxx
Basic Personal Exemption
xxx
Add: Additional Exemptions
xxx
Total Exemptions
xxx
Add: Premium Paid on Health and/or
Hospitalization Insurance
xxx
Less: Total Exemptions and Premium
Payment
xxx
Net Compensation Income
xxx
Tax Due (Section 24 (A))
xxx

Taxable Income on ...

Gross Compensation Income
Gross Compensation Income
xxx
Multiply by tax rate
15%
Tax Due
xxx
This calculation are for a non-resident alien
employed by such firms earning purely
compensation income.

Taxable Income on ...

Net Income
Earning purely business or professional income.
Gross Business Income xxx
Itemized Deduction or 40% OSD xxx
Basic Personal Exemption xxx
Add: Additional Exemptions xxx
Total Exemptions xxx
Premium Paid on Health xxx
Less: Total Allowable Deductions xxx
Net Income xxx
Tax Due (Section 24 (A)) xxx

Taxable Income on ...

Net Income
Earning both business/professional and compensation
income.
Gross Business Income xxx
Gross Compensation Income xxx
Total Gross Income xxx
Itemized Deduction or 40% OSD xxx
Basic Personal Exemption xxx
Add: Additional Exemptions xxx
Total Exemptions xxx
Premium Paid on Health xxx
Less: Total Allowable Deductions xxx
Net Income xxx
Tax Due (Section 24 (A)) xxx

Taxable Income on ...

Entire or Gross Income
For non-resident alien not engaged in trade
or business in the Philippines earning
business or professional income,
compensation income or combination of
both:
Gross Income
xxx
Multiply by the final tax rate
Tax Due
xxx

25%