BENEFITS AND STANDARD

DEDUCTIONS
for Business Mathematics
Senior High School (ABM)
Quarter 2 / Week 3
 FOREWORD

This self-learning kit will serve as a guide and will give you
basic knowledge about the required employee compensation rates
particularly about overtime that are used in all organizations which is
based on the labor code of the Philippines.
In this learning kit, you will gain knowledge in identifying the
variables needed in computing overtime and the important reminders
that are based on the labor code of the Philippines. This knowledge is
very important for you to be aware more about your own
compensation as an employee and as an employer of a company.

What Happened?
This section contains pre-activities, like review of the prior
knowledge and a pretest, on what the learners have learned in their
previous discussions.
What You Need To Know? (Discussion)
This section contains the meaning of overtime as described by
the labor code of the Philippines and the variable needed for its
computation.
What Have I Learned? (Evaluation/Post Test)
The exercises contained in this section are guaranteed to build
comprehension, skills, and competence with regards to the topic.
These will also serve as a diagnostic tool to identify your areas of
strengths and difficulties.

2
 TAXABLE AND NON TAXABALE BENEFITS
LESSON
1

OBJECTIVES:
K. Determine taxable from nontaxable benefits;
S. Classify taxable from non taxable benefits;
A. Classify taxable from non taxable benefits with accuracy.

I. WHAT HAPPENED
PRE-TEST:
Which of the following has a taxable income?
A.

https://blog.taxact.com/difference-between-taxable-and-nontaxable- income/

B.

https://www.google.com/search

3
PRE-TEST:
Instruction: Identify the benefits below as taxable or non taxable and write your answer in your
notebook.

1. Gifts and inheritances.

2. Child support payments.
3. Buying goods in the grocery store.
4. Damage awards for physical injury or sickness.
5. Salary of an employee.

II. WHAT YOU NEED TO KNOW

DISCUSSION

A. Taxable Benefits

A taxable benefit is a payment from an employer to an employee that is considered a

positive benefit and can be in the form of cash or another type of payment.
Types of taxable compensation
Gross compensation income is defined as taxable income arising from an
employer/employee relationship and includes the following:
• salaries, wages, compensation, commissions, emoluments, and
honoraria
• bonuses and other benefits exceeding PHP90,000
• allowances for transportation, representation, entertainment, and other similar items
• fees (including director’s fees paid to a director who is at the same time
an employee of the payer)
• taxable pensions
• taxable retirement pay
• other income of a similar nature, including compensation paid in-kind.

As a rule, any amount that the employer gives his employees is taxable compensation,
unless otherwise exempted by express provision of laws, rules and regulations.
B. Nontaxable Benefits

Nontaxable benefits are not taxed or only partially taxed benefits that are
completely tax free.

Examples of nontaxable benefits include health insurance, retirement services

(like a deferred compensation plan), and de minimis benefits, which are those that cost only
minimal amounts, basic salaries of minimum wage earners, holiday pays for regular and
4
special holidays, hazard pays, overtime pay for work beyond eight hours.

Other examples of nontaxable benefits include the following:

• Proceeds of life insurance policies

• Amount received by insured as return of premium
• gifts, bequests, and devises
• compensation for injuries or sickness
• income exempt under treaty
retirement benefits, pensions, and gratuities, etc.
• Miscellaneous items:
• Income derived by foreign government
• Income derived by the government or its political subdivisions
• prizes and awards exempted by law
• prizes and awards in sports competition
• 13th month pay and other benefits subject to the PHP90,000 limit
• GSIS, SSS, Medicare and other contributions
• Gains from sale of bonds, debentures, or other certificate of indebtedness
with a maturity of more than 5 years
• Gains from redemption of shares in mutual fund.

5
III. WHAT HAVE I LEARNED

Taxable benefit
Payment from an employer to an employee that is
considered a positive benefit and can be in the form of cash or
another type of payment.
Nontaxable benefits
Are not taxed or only partially taxed benefits that are
completely tax free.

POST TEST:

Classify the following benefits as taxable and nontaxable benefits in a tabulated form and
write your answer in your notebook.

1. Compensation for injuries or sickness

2. Prizes and awards exempted by law
3. Employees salaries and wages
4. Transportation allowances
5. Mr. De la Cruz bonus amounting to P200,000.00
6. Mrs. Perez 13th month pay amounting to P30,000.00
7. Mr. Tan’s retirement pay
8. Mr. Lee’s profit in selling bond in a company.
9. Angel’s birthday gift
10. Life insurance policy

6
 REFERENCE

https://taxa.acctgcenter.ph

https://home.kpmg/xx/en/home.html

https://blog.taxact.com/difference-between-taxable-and-nontaxable- income/

https://www.google.com/search

7
 SYNOPSIS AND ABOUT THE AUTHOR
SYNOPSIS ANSWER
KEYS
This SLK (Self-Learning Kit) is all about
distinguishing taxable from non taxable wage
earners. In this lesson your mathematical
skills under knowledge will be enhanced by
classifying the different taxable and non
taxable benefits and become well-informed
when you opted to work in a particular
company or industry after graduating in the
Senior High School.
As you go over the discussion, you will
appreciate the importance and usage of this
lesson to the world of employment, you will
know your benefits as a future wage earners.

AUTHOR

MA. WILMA Q. SEVILLO finished her degree in

Secondary Education at Colegio de Santa Catalina de
Alejandria (COSCA), Dumaguete City and earned her
master’s degree at University of Southern Philippines
Foundation, Cebu City. Mrs. Sevillo is currently teaching at
Siaton National High School, Siaton, Negros Oriental as
teacher III with teaching experience of 24 years. She is
presently handling mathematics subjects in Senior High
Department of the said school.

8
 LESSON STANDARD DEDUCTIONS AND
2 THEIR CORRESPONDING
COMPUTATIONS

OBJECTIVES:
K. Enumerate the standard deductions with the corresponding
computations;
S. Compute the given standard deductions using the given
formulas;
A. Solve the given standard deductions with precision.

I. WHAT HAPPENED

You have been taught about the variables needed in computing overtime. Now this time,
we will now proceed in the procedure on how to compute overtime, rest day, holiday pay and
night shift differential in which we shall use in differential real-life situations. But before that,
let us first be reminded of the important points to remember by answering the pretest
activities.
QUICK RECALL

Taxable benefits Nontaxable benefits

a payment from an employer to an employee that Are not taxed or only
is considered partially taxed benefits that are
a positive benefit and can be in the form of cash completely tax free.
or another type of payment.

9
PRE-TEST:
Instruction: Which of the following could be the standard deductions of wage earner
individuals? Write your answer in your notebook by putting a check or x mark on the box.

1. Insurance/ Security System (SSS or GSIS)

2. Medicare (Phil Health)

3. Red Cross

4. BIR With Holding Tax

5. Pag-ibig Funds

II. WHAT YOU NEED TO KNOW

DISCUSSION
Standard deduction is the portion of income not subject to tax that can be used to reduce your tax
bill. Not all taxpayers qualify for the standard deduction.

There are four statutory obligations that both employees and employers are
obliged to adhere to under the Philippine Law.

The monthly Social Security (SSS for private employees and GSIS for public
employees), PhilHealth and Pag-IBIG, BIR witholding tax. Fund contributions from the
employees’ salary, together with the employer’s share of contributions, has to be paid to the
respective statutory agencies or any accredited banks (if applicable) on or before the payment
date. The payment date is the 10th day of every month.

1. SOCIAL INSURANCE SYSTEM

A. Social Security System (SSS)

SSS is a privatized social insurance program established to protect members and

their families against the hazards of disability, sickness, maternity, old age, death and other
contingencies resulting in loss of income or financial burden.

10
 Your monthly contribution is based on your compensation. The
current SSS contribution rate is 11% of the monthly salary credit not exceeding
₱16,000 and this is shared by the employer (7.37%) and the employee (3.63%).

B. Government Service Insurance System (GSIS)

Created by Commonwealth Act No. 186 and Republic Act No. 8291 (GSIS Act of
1997), GSIS is a social insurance institution that provides a defined benefit scheme under the
law. It insures its government employee members against the occurrence of certain
contingencies in exchange for their monthly premium contributions.

The employees' share in the life insurance and retirement

contributions of regular members is 9% of their basic salary while the employers' share is
12% of the same. This is mandated under Section 5 of RA 8291 or the GSIS Charter.
2. PAG-IBIG

All individuals can contribute to the Home and Development Mutual Fund (HDMF),
more commonly known to many as PAG-IBIG, when they reach 18 years old. For all
employees, HDMF contribution is automatic as soon as they are hired by a company and start
earning a salary, it comes in the form of a deduction from the employee’s pay.

The employee’s contribution to PAG-IBIG to be computed as 2% of his salary (or 1%

if he is earning Php1,500 or less). All employers will contribute 2% of the monthly
compensation of all covered employees.

It is important to note that the maximum compensation considered in computing a member’s

monthly PAG-IBIG contribution is Php5,000, which equates to Php100 contribution each for
the employee and the employer. This means that even if the monthly compensation of an
employee exceeds Php5,000, his contribution will remain at Php100.

3. PhilHealth Contribution

The 2021 premium rate is 3.5%, on your monthly PhilHealth premium based on your
salary.

Employee or employer share = (Monthly basic salary x 0.035) / 2

Here’s a sample computation for an employee with a salary of Php 25,000:

Php 25,000 x 0.035 = Php 875 (Total monthly contribution) / 2

= Php 437.5 (Employee or employer share)

11
4. PERSONAL INCOME TAX

Starting January 1, 2018, compensation income earners, self- employed and

professional taxpayers (SEPs) whose annual taxable incomes are P250,000 or less are exempt
from the personal income tax (PIT).

The 13th month pay and other benefits amounting to P90,000 are likewise tax-
exempt.

Tax schedule effective January 1, 2018 until December 31, 2022 is as

follows:

AMOUNT RATES

Not Over P250,000 0%

Over P250,000 but not over P400,000 20% of the Excess Over P250,000

Over P400,000 but not over P800,000 P30,000 + 25% of the Excess over
P400,000

Over P800,000 but not over P2,000,000 P130,000 +30% of the Excess over
P800,000

Over P2,000,000 but not over P490,000 + 32% of the Excess over
P8,000,000 P2,000,000

Over P8,000,000 P2,410,000 +35% of the Excess over

P8,000,000

Note: 13th Month Pay = Monthly Salary

Example Problem 1:

For a Call Center Agent who receives a monthly salary of P21,000 with mandatory
annual deductions of P15,166.00 consisting of SSS, Philhealth, and Pag-ibig contributions,
the income tax is computed as follows:

A. Annual Basic Salary P252,000.00

B. 13th Month Pay and Other Benefits 21,000.00

C. Mandatory Contributions 15,166.00

12
 Computation of Income Tax

 Annual Gross Income (AGI) = (A+B) 273,000.00

 Deductions and Exemptions (DE) = (B+C) 36,166

 Net Taxable Income (NTI) = (AGI - DE) P236,834.00

Income Tax Rate: Over 0 – P250,000 = 0 %

TAX DUE = P 0.00

Example Problem 2:

For a public school TEACHER (SG14, Step1) who receives a monthly salary of
P26,494.00 with mandatory annual deductions of P34,185.00 consisting of GSIS, Philhealth,
and Pag-ibig contributions, the income tax is computed as follows:

A. Annual Basic Salary P317,928.00

B. 13th Month Pay and Other Benefits 26,494.00

C. Mandatory Contributions 34,185.00

Computation of Income Tax Annual Gross Income

 Annual Gross Income (AGI) = (A+B) P344,422.00

 Deductions and Exemptions (DE) = (B+C) 60,679.00

 Net Taxable Income (NTI) = (AGI - DE) P283,743.00

Income Tax Rate: Over 0 – P250,000 = 0 % Refer to Tax

Schedule Table

Over P250,000 – P400,000 = 20% of Excess over P250,000

TAX DUE : P250,000.00 = P 0.00

283,743.00 - 250,000.00
= 33,743.00
33,743.00 x 20% = P 6,748.60

13
 III. WHAT HAVE I LEARNED

The standard deductions of wage earners are the following:

1. Social Insurance System (GSIS/SSS)
2. PhilHealth
3. Pag-ibig

POST TEST:
A. Identification: Identify the standard deduction of wage earners and write your answer in
your notebook.
1) It has a monthly contribution of P100 for its members.
2) A social insurance institution for government employees which has an
employees' share of 9% and employer’s share of 12%.
3) Has a monthly premium rate of 3.5% of wage earners’ monthly
salary for both employees and employer.
4) An insurance security for private employees with a monthly contribution rate of
11% of the monthly salary of an employee, where the employer has a rate of (7.37%) and
the employee’s share is (3.63%).
5) A government annual tax which follows a tax schedule with corresponding rates
of 0%, 20%, 25%, 30% etc. according to a given bracket of amount.
B. Problem Solving: Read carefully and analyze the given problem.
1. Clark is a classroom teacher in one of the private schools in his hometown with a monthly
salary of P22,000.00. How much is his monthly PhilHealth contribution and SSS
contribution?
2. Mr. Reyes is head of office in one of the government offices in his municipality with a
monthly salary of P40,000. How much his monthly GSIS premium share? What about his
employer’s share?
3. James work as a food panda delivery man with a monthly salary of P18,000. Find how much
monthly contribution he will pay on the following:
A.SSS contribution
B. Pag-ibig
C. PhilHealth
4. A government employee who receives a monthly salary of P28,000 with mandatory annual
deductions of P37,320.00consisting of SSS, Philhealth, and Pag-ibig contributions. Compute
the income tax.
5. A government physician has monthly salary of P80,000.00, compute how
much income tax he will pay.

14
 REFERENCES

http://legacy.senate.gov.ph/

https://www.activpayroll.com/

https://www.google.com

https://sprout.ph

https://www.gsis.gov.ph

www.investopedia.com

15
 DEPARTMENT OF EDUCATION
SCHOOLS DIVISION OF NEGROS ORIENTAL

SENEN PRISCILLO P. PAULIN, CESO V

Schools Division Superintendent

JOELYZA M. ARCILLA, EdD

Assistant Schools Division Superintendent

MARCELO K. PALISPIS, EdD

Assistant Schools Division Superintendent

NILITA L. RAGAY, Ed.D.

Assistant Schools Division Superintendent
CID Chief

ROSELA R. ABIERA
Education Program Supervisor – (LRMS)

ELISA L. BAGUIO, EdD

Division Education Program Supervisor – MATHEMATICS

MARICEL S. RASID
Librarian II (LRMDS)

ELMAR L. CABRERA
PDO II (LRMDS)

MA. WILMA Q. SEVILLO

Writer

RADHIYA A. ABABON
Lay-out Artist

ALPHA QA TEAM
RICKLEOBEN V. BAYKING
LITTIE BETH S. BERNADEZ
MERCYDITHA D. ENOLPE
RONALD TOLENTINO

BETA QA TEAM
RICKLEOBEN V. BAYKING
LITTIE BETH S. BERNADEZ
GIL S. DAEL
MARIA SOLEDAD M. DAYUPAY
MARIA ACENITH D PASTOR
JEE LIZA T. INGUITO
MERCYDITHA D. ENOLPE
RONALD G. TOLENTINO

ENHANCEMENT TEAM
DONNA D. FRANCISCO
ANGELICA G. ZAMBRANO

DISCLAIMER

The information, activities and assessments used in this material are designed to provide accessible learning modality to the teachers
and learners of the Division of Negros Oriental. The contents of this module are carefully researched, chosen, and evaluated to comply with the
set learning competencies. The writers and evaluator were clearly instructed to give credits to information and illustrations used to substantiate this
material. All content is subject to copyright and may not be reproduced in any form without expressed written consent from the division.

16
 SYNOPSIS AND ABOUT THE AUTHOR
SYNOPSIS ANSWER
KEYS
This SLK (Self-Learning Kit) is all
about distinguishing taxable from non taxable
benefits and enumerating the standard
deductions with the corresponding
computations of wage earners. In this lesson
your mathematical skills will be enhanced in
classifying the different taxable and non
taxable benefits and computing the standard
deductions of wage earners.
As you go over the discussion, you
will appreciate the importance and usage of
this lesson to the world of employment, you
will know your benefits as a future wage
earners.

AUTHOR

MA. WILMA Q. SEVILLO finished her degree in

Secondary Education at Colegio de Santa Catalina de
Alejandria (COSCA), Dumaguete City and earned her
master’s degree at University of Southern Philippines
Foundation, Cebu City. Mrs. Sevillo is currently teaching at
Siaton National High School, Siaton, Negros Oriental as
teacher III with teaching experience of 24 years. She is
presently handling mathematics subjects in Senior High
Department of the said school.
ANSWER KEYS:
Post Test A
1. Pag-Ibig
2. GSIS
3. PhilHealth
4. SSS
Post Test B
No. 4.
A. Annual BS - P 336,000.00
B. 13th - 28,000.00
C. Mandatory Contributions - 37,320.00
Computations of Income Tax
Annual Gross Income - P 364,000.00
Deductions/Exemptions - 65,320.00
Net Taxable Income - 298,680.00

AMOUNT RATES
Over P250,000.00 but not over P 400,000.00 20% of the excess over P 250,000.00

Tax Due:
P 298,680.00 - 250,000.00 = 48,680.00

P 48,680.00 x 20% = P 9,736.00

No. 5.
A. Annual BS - P 960,000.00
B. 13th - 80,000.00
C. Mandatory Deductions:
GSIS 9% of the basic salary
(P 80,000x9%= 7,200 x12 months) - P 86,400.00
PAG-IBIG (P 100.00 x12) - 1,200.00
PHILHEALTH 3.5% / 2
(P 1,400.00 x 12) - 16,800.00

Total Deductions - P 104,400.00

Computations of Income Tax:

Annual Gross - P 1,040,000.00
Deductions/Exemptions - 184,400.00
Net Taxable Income - P 855,600.00

AMOUNT RATES
Over P800,000.00 but not over P 2,000,000.00 P 130,000.00 + 30% of the excess over P 800,000.00

Tax Due:
P 855,600.00 - 800,000.00 = P55,600.00
P 55,600.00 x 30% =P 16,680.00
P 130,000 + 16,680.00 = P 146,680.00