MODULE 4

EXCLUSION FROM GROSS INCOME

GROSS RECEIPTS AND COLLECTIBLES
( Increase in Networth)

NOT INCOME INCOME

SEC 32 B of NIRC:
EXCLUSIONS from GROSS INCOME
1. Life Insurance
A the contract, whereby the insurer in
consideration of a premium undertakes to pay a
certain sum of money either on the death of the
insured or on the expiry of a fixed period.

EXCLUDED from Income, The proceeds of life insurance

policies paid to the heirs or beneficiaries upon the death of the insured,
whether in a single sum or otherwise, but if such amounts are held by the
insurer under an agreement to pay interest thereon, the interest
payments shall be included in gross income
EXCLUSIONS from GROSS INCOME

2. Amount Received by Insured

as Return of Premium

The amount received by the insured, as a return of premiums

paid by him under life insurance, endowment, or annuity contracts,
either during the term or at the maturity of the term mentioned in
the contract or upon surrender of the contract.

Taxable: Excess
over the total Annual premium paid, P10,000 x 20 yrs = P200,000 Return of capital
periodic premium
Received as Return of premium 225,000
paid.
Taxable Income P 25,000 Return on capital
EXCLUSIONS from GROSS INCOME
3 Gratuitous Transfers

Gifts / donations Liable to TRANSFER Tax,

not Income Tax

INHERITANCE:

Bequests
(Term used for personal property given by will)

 Devise
Real property leave to someone
by the terms of a will.
Income

The value of property acquired by gift, bequest, devise, or descent: Provided,

however, That income from such property, as well as gift, bequest, devise or descent of
income from any property, in cases of transfers of divided interest, shall be included in
gross income.
EXCLUSIONS from GROSS INCOME
4.
Compensation
for Injuries or
Sickness
Amounts received, through Accident or Health Insurance
or under Workmen's Compensation Acts, as
compensation for personal injuries or sickness, plus the
amounts of any damages received, whether by suit or
agreement, on account of such injuries or sickness.
EXCLUSIONS from GROSS INCOME

4. Benefits received from or enjoyed

under the Social Security System in
accordance with the provisions of Republic
Act No. 8282
EXCLUSIONS from GROSS INCOME

5. Benefits received from the GSIS under

Republic Act No. 8291, including retirement
gratuity received by government officials and
employees.
To summarize, the following are not included as income of the recipient of the
amount:

 Proceeds of life insurance NOT INCOME

 Return of periodic insurance premium payments

 gratuitous transfers received:

 donations
 inheritance

 compensation for injuries/sickness

 SSS/GSIS benefits received

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