TAX RATES ON “RETURNABLE” INCOME

TABLE 1 shows the progressive rates of income tax on ordinary income. It

is used to compute the tax on taxable income of:
a) Resident citizen
b) Non-resident citizens and Overseas Contract Workers
c) Resident aliens
d) NRA engaged in trade or business in the Philippines.

NOTE TO STUDENTS TO REMEMBER

The personal and additional exemptions have been removed by RA No. 10963 (TRAIN
Law) beginning January 1, 2018. The said exemptions were replaced with the first
P250,000 of taxable income which is exempt from tax.

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 TABLE 1 Tax Schedule Effective Jan. 1, 2023 ONWARDS

OVER BUT NOT THE TAX PLUS OF EXCESS

OVER SHALL BE OVER

P 0 P 250,000 P 0

250,000 400,000 0 15% P 250,000

400,000 800,000 22,500 20% 400,000

800,000 2,000,000 102,500 25% 800,000

2,000,000 8,000,000 402,500 30% 2,000,000

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8,000,000 2,202,500 35% 8,000,000
 NOTES TO REMEMBER BY STUDENTS:

In computing income tax, a fractional part of a peso less than P0.50 shall be
ignored, and will be rounded up to the nearest peso if more than P0.50.

For example:
a) Amount computed as tax
P17,590.45
Should be tax
P17,590.00

b) Amount computed as tax P59,016.60

Should be tax
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P59,017.00
 ILLUSTRATION

Compute the tax if the taxable income is:

1. P210,000
2. P350,000
3. P500,000
4. P50,000,000

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 SOLUTIONS

1. The taxable income of P210,000 falls within the bracket over P0 but not
over P250,000, thus, there is NO TAX.

2. P350,000
Tax on P250,000 P 0
Tax on P100,000 x 15% 15,000
Tax on P350,000 P15,000

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 SOLUTIONS
3. P500,000
Tax on P400,000 P 22,500
Tax on P100,000 x 20% 20,000
Tax on P500,000 P 42,500

4. P50,000,000
Tax on P8,000,000 P 2,202,500
Tax on P42,000,000 x 35% 14,700,000
Tax on P50,000,000 P16,902,500

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 2) Tax Rates of Individuals Earning Purely Compensation Income
a) Individuals earning purely compensation income are those individuals whose source of
income were derived from an EMPLOYEE - EMPLOYER RELATIONSHIP.

b) They shall be taxed using the graduated income tax rates.

c) Taxable income for such individuals is their Gross Compensation Income received from
their employer, less the following deductions:
i. Non-taxable (exempt) income or benefits
ii. Government contributions (i.e. SSS, GSIS, Philhealth, Pag-IBIG)
iii. Union dues

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for listening. See you next meeting!
 END OF LESSON