Republic of the Philippines

Department of Education
Region VII - Central Visayas
Schools Division of Mandaue City
Centro, Mandaue Ci

SUPPLEMENTARY
LEARNING MODULE FOR
SENIOR HIGH SCHOOL
LEARNERS
Grade Level :Grade 11
Core Subject: Fundamentals of Accountancy, Business and Management 2
Semester: 2nd
Grading: Final Grading
Week: 4-5
Module 4

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 INTRODUCTION

In this module the students are introduced to taxation, classification of

taxpayers,procedure in the computation of gross taxable income.

It is often quoted that there are only two permanent things in this world, change
and taxes. Paying taxes is one of the basic responsibilities of every individual.

Income tax is a tax on a person’s income, emoluments, profits arising from

property, practice of profession, conduct of trade or business or on the pertinent items of
gross income specified in the Tax Code of 1997(Tax Code), as amended, less deductions
and/or personal and additional exemptions. If any, authorized for such type of income, by
the Tax Code, as amended , or other special laws.

LEARNING OBJECTIVES:

At the end of this module the students will be able to:

• Explain the principles and purpose of taxation.

• Differentiate the kinds of individuals for income taxation purposes.
• Enumerate the the personal and additional deductions in the computation
for income tax.
• Explain the procedure in the computation of gross taxable income and tax
due.

Taxation is the process by which our government, through our lawmakers raises
income to pay its necessary expenses.
 Our Congress, through our senators and congressmen, enacts tax laws. Tax laws
gives our government the authority to collect the necessary taxes from its constituents.

Tax is the enforced proportional contribution from persons and the properties
owned by the State by virtue of its sovereignty for the support of the government and its
public needs.

PURPOSES OF TAXATION:

These can be classified into primary and secondary purposes

1. The primary purpose of taxation is to provide the proper funding needed to run the
government. The money collected from taxes will finance the projects that will
promote the general welfare of the people. It will be used to pay for the police and
military forces that will guard our territories and to maintain peace and order.
2. There are various secondary purpose of taxation:
a. By imposing high customs duties or taxes on imported goods, local products
made in the Philippines would remain competitive. Additional taxes would jack
up the prices of imported goods.
b. By imposing progressive taxes, it will reduce the inequalities between the
wealth and income of our people. A progressive system of taxation means that
those who can earn mor will be subjected to higher income taxes. This will
narrow down the difference between the disposable income of those who earn
more from those who are less.
c. By increasing taxes, the government may mitigate the effect of an impending
inflation. Inflation is a situation wherein the purchasing power of peso will go
down due to rising prices of commodities.
d.

DEFINITION OF INCOME

Income means all wealth, which flows into the taxpayer other than a mere return of
capital.
Kinds of Income:

1. Compensation Income – this is the income received from employment or

employee-employer relationship. This is called salaries and wages earned during
the taxable year. This may also include bonues and allowances.
2. Business income – this is the income generated by entrepreneurs or by different
professionals like, lawyers, doctors and accountant(professional income)
3. Passive Income – generated by different investments made by an individual.

Classification of taxpayers

Individual income taxpayers are classified into the following:

1. Resident citizen – a Flilipine citizen residing permanently in the Philippines.

2. Non – resident citizen – a Filipino residing permanently abroad or works abroad
most of the time. At least 183 days during the taxable year. Ex. Overseas Contract
Workers or OFWs)
3. Resident Alien – a foreigner residing in the Philippines.
4. Non – resident alien – a foreigner not residing in the Philippines

Resident citizens are taxed on all income derived from sources within and outside the
Philippines. Non-resident citizens and foreigners or aliens whether resident or non –
resident are taxed only on income derived within the Philippines.

TAXABLE INCOME

Taxable income means the pertinent items of gross income specified in the Tax Code
as amended, less the deductions and/or personal and additional exemptions, if any,
authorized for such types of income, by the Tax Code or other special laws.

GROSS COMPENSATION INCOME

Compensation income is income that is derived from employment. This is the so called
salaries and wages earned during the taxable year.

DEDUCTIONS FROM GROSS COMPENSATION INCOME:

The law allows the following deductions from the gross income.
a. Basic personal exemptions, and
b. Premium payments for health/organization insurance.

Personal Exemptions

For single individual or married individual judicially

sanctioned as legally separated with no qualified P 50,000.00
dependents.
For head of family P 50,000.00
For each married individual* P 50,000.00

Note: In case of married individual where only one of the spouses is deriving gross
income, only such spouse will be allowed to claim the personal exemption.

ADDITIONAL PERSONAL EXEMPTIONS:

For each qualified dependent/child , an amount of P 25,000.00 additional personal

exemption can be claimed but only up to 4 children of not more than 21 years of age.
In the case of child who are physically or mentally incapacitated age will not matter.

1. The husband who is deemed the head of the family unless he explicitly waives his
right in favor of his wife.
2. The spouse who has custody of the child or children in case legally separated
spouses. Provided, that the total amount of additional exemptions that may be
claimed by both shall not exceed the maximum additional exemptions allowed by
the Tax Code.
3. The individuals considered as head of the family supporting a qualified dependent.

The maximum amount of P2,400 premium payment on health and/or

hospitalization insurance can be claimed if:
a. Family gross income yearly should not be more than P250,000.
 b. For married individuals, the spouse claiming the additional exemptions for the
qualified dependent shall be entitled to this deduction.

Computation of Income Tax Payable of individual (resident and non-resident

citizens)

Gross Income P xxx

Less: Allowable deductions xxx
Net income Pxxx
Less:Personal and Additional Exemption Xxx
Net taxable income Pxxx
Multiply by tax rate Xxx
Income tax due Pxxx
Income tax payable xxx

TAX TABLE

IF TAXABLE INCOME TAX DUE IF TAXABLE INCOME TAX DUE

IS IS
Not over P10,000 5%
Over P10,000 but not P500 +10% of the Over P140,000 but not P22,5000+25% of the
over P30,000 excess P10,000 over P250,000 excess over P140,00
Over P30,000 but not P2,500+15% of the Over P250,000 but not P50,000 +30% of the
over P70,000 excess over P30,00 over P500,00 excess over P250,000
Over P70,000 but not P8,500 +20% of the Over P500,000 P125,000 +32% of the
over P140,000 excess of P70,000 excess over P500,000
ILLUSTRATIVE PROBLEM

Joshua is a resident citizen. Married, with two(2) qualified dependent children earning
purely compensation income amounting to P565.000. His wife is an employee earning
P198,000.00. the taxes withheld by the employer of the husband totaled in P114,500
while the employer of the wife withheld a total of P24,500.

Computation of tax for Joshua and wife as follows

Joshue Wife
Gross income P565,000 P198,000
Total income 565,000 198,000
Deductions
Personal exemption (50.000) (50,000)
Additional exemption(2 children) (50.000)
Total deductions (100,000) (50,000)
Net taxable income P465,000 P148,000
Tax due
On first P250,000 P50,000
On remainder of P215,000 at 30% 64,500
On first P140,000 22,500
On remainder of P8,000 at 25% 2,000
Total tax P114,500 P24,500
Less:tax withheld by employer (114,500) (24,500)
Net tax due 0 0
:

End of the lesson

 ASSESSMENT

Test I :Answer the following:

1. What is taxation and what are primary and secondary purpose of taxation?
2. How are individuals classified for income tax purposes?
3. What are the different kinds of income for tax purposes?

Test II: Identification. Identify the classification of the following individuals whether they
are, Resident Citizens,(RC), Non Resident Citizens(NRC), Resident Aliens(RA) and Non
-resident Alien(NRA).

1. Kate, a Filipino resident was born in Cebu, is now working as a nurse in a hospital
in Australia.________
2. Lawrence, a Japanese national, has been living an working here in the Philippines
since 1994.______
3. Christian, a Filipino residing in Cebu City visited Hongkong for a 5 day vacation
trip._______
4. Joseph, an American member of a famous boy band, performed in a two day
concert in Waterfront Cebu______
5. Colis, an Argetinian national and a resident in Brazil, stayed here in the Philippines
from February 2017 to December 2017. He is working in a certain project for a
local company._______

Test III. Compute for the amount of additional personal exemptions that can be availed
by the following resident citizens in 2017.

1. Ralph, married, supports her father and three(3) minor children.____

2. Shing, single, supports her minor sister and two illegitimate children._____
3. Haily, legally separated, supports her own legitimate child and three legally
adopted children._______
4. Jona, single, supports her uncle and 23 year old illegitimate child.____
5. Zane, single mom has three illegitimate children at at start of year 2017. In the
middle of that year one her son celebrated his 22nd birthday, the second son died.
On October 2017 she gave birth to her 4th son._______

Test IV. Illustrative Problem.

Ralph and Shing, both Filipinos, got married five years ago. Ralph has his own
furniture business which generated revenues worth P720,000 and incurred expenses
worth P246,000 this year. Shing is an employee a leading pharmaceutical company
and is earning a P425,000 a year. They have three minor children and one adopted
child is a minor.

1. How much is the basic personal exemption of Ralph?

2. How much is the additional personal exemption of Ralph?
3. How much is the income taxable of Ralph?
4. How much is the income tax payable of Ralph?
5. How much is the basic personal exemption of Shing?
6. How much is the additional personal exemption of Shing?
7. How much is the income taxable of Shing?
8. How much is the income tax payable of Shing?

END

God Bless!
eferences:

Fundamentals of Accountancy, Business and Management 2

By: Angeles A. De Guzman, DBA, CPA
Published by:LORI MAR 2018

Fundamentals of Accountancy, Business and Management2

By: Josefina L. Betican
James Cristopher D. Domingo
Fermin Antonio D. Yabut
Published by:VIBAL Group

DISCLAIMER

I do not own or license any copyright in the

texts, images, photographs, graphics and other
content provided in this module. This module is
solely for non-commercial, informational and
educational purposes. There is no intention on
my part to claim ownership as the contents or
make profit out of this module.

Prepared by: Sheila O. Pielago

Teacher 1
Canduman National High School
SCHOOLS DIVISION OF MANDAUE CITY

SHEILA O. PIELAGO
Writer/Illustrator

KENN NORWAY B. MARZADO, EdD

Education Program Supervisor – EPP/TLE

JAIME P. RUELAN, EdD

Chief, Curriculum Implementation Division

ISMAELITA N. DESABILLE, EdD

Education Program Supervisor – (LRMDS)

ESTELA B. SUSVILLA, EdD CESO VI

Assistant Schools Division Superintendent

DR. NIMFA D. BONGO,EdD CESO V

Schools Division Superintendent