REGULAR INCOME TAX: INCLUSION IN GROSS INCOME

The items of gross income which includes either of the following:

1. Gross income subject to final tax
2. Gross income subject to capital gains tax
3. Gross income subject to regular income tax
ITEMS OF GROSS INCOME SUBJECT TO REGULAR TAX
1. Compensation for services in whatever form paid
- Compensation income technically pertains to the types of employees benefits that are
subject to regular tax. Fringe benefits for managerial or supervisory employees are not
considered compensation.
2. Gross income from the conduct of trade, business, exercise of a profession
- Includes income from any trade or business, legal, or illegal and whether registered or
unregistered.

Gross income from business or profession is determined as follows:

Sales Xxxx
Less: Cost of sales Xxx
Gross income from operations xxx

3. Gains derived from dealings in properties

This includes:
a. Gains or losses in dealing in ordinary assets
b. Dealings in capital assets other than domestic stocks and real properties
c. Net capital gain from other capital assets after deducting capital losses; however, net capital
loss is not an item of deduction against gross income.

4. Interest
- These refers to interest income other than passive interest such as:
a. Interest income from lending activities
b. Interest income from bonds and promissory notes
c. Interest income from bank deposits abroad
5. Rents
6. Royalties- these refers to royalties that are active by nature earned from sources within the
Philippines and active royalty income earned from sources outside the Philippines.
7. Dividends- pertains to those declared by foreign corporation
8. Annuities- excess payments of annuity payments received by the recipient over premium paid.
9. Prizes and winnings = these referes to those exempted from final tax.Example:
a. Received without effort to join a contest
b. Received in athletic competitions sanctioned by their respective national sports association
c. Winnings from pcso or lotto not exceeding20,000
10. Pensions- refers to those benefits that fail to meet the exclusions criteria
11. Partner’s distributive share from the net income of general professional partnership