AN INDIVIDUAL DERIVING INCOME

SOLELY FROM COMPENSATION AND AN

ILLUSTRATION OF SUBSTITUTED FILING:

GROUP 10
 ILLUSTRATIVE COMPUTATION

ON TAXABLE INCOME

BASIC SALARY PXX

Add: 13th month pay and other bonuses of which
P82,00 is exempt XX
GROSS COMPENSATION INCOME PXX

DEDUCTIONS:
Premium Hospitalizatiom And Health Insurance
(Not Exceeding P2,400) PXX

Personal Exemption XX

Additional Exemptions
XX XX
TAXABLE INCOME PXX
 ON TAX DUE

TAXABLE IINCOME PXX

X SCHEDULAR TAX RATES (REFERS TO TABLE AS
SHOWN ON PAGE 143) %
TAXABLE INCOME PXX

ON INCOME TAX PAYABLE

INCOME TAX DUE

PXX
LESS: WITHHOLDING TAX ON COMPENSATION INCOME
XX

INCOME TAX PAYABLE PXX

 SUBSTITUTED FILING

INCOME TAX DUE PXX

LESS: WITHHOLDING TAX ON COMPENSATION INCOME

(BIR FORM NO. 1604-CF) XX

-0-
INCOME TAX DUE IS EQUAL TO TAX WITHHELD

ILLUSTRATIVE PROBLEMS:
MR. ROLANDO IBANES, A RESIDENT FILIPINO CITIZEN, MARRIED WITH THREE (3) DEPENDENT CHILDREN WHO ARE
ALL MINORS AND ARE LIVING WITH HIM FOR CHIEF SUPPORT. ASIDE FROM HIS BEING AN EMPLOYEE OF GEMS
APPLIANCE PLAZA, HE HAS NO OTHER SOURCE OF INCOME.
 FOR TAXABLE YEAR 20A, MR. IBANEZ HAS REPORTED THE FOLLOWING DATA:

BASIC SALARY P300,00

ADD: 13TH MONTH PAY AND OTHER BONUSES 107,00

DEDUCTIONS:

PREMIUM HOSPITALIZATIOM AND HEALTH INSURANCE 4,500

50,00
PERSONAL EXEMPTION
75,00
ADDITIONAL EXEMPTIONS
REQUIRED:
• DETERMINE HOW MUCH AMOUNT THAT CAN BE DEDUCTED FROM 20A GROSS INCOME OF MR.
IBANEZ?
• HOW MUCH IS HIS TAXABLE INCOME?
• HOW MUCH IS HIS TAX DUE?
• WHAT BIR FORM WILL HE USE IN FILING INCOME TAX RETURN?
 SOLUTION:

• THE AMOUNT THAT CAN BE DEDUCTED FROM MR. IBANEZ’S 20A INCOME TAX RETURN IS
DETERMINED AS FOLLOWS:

PREMIUM HOSPITALIZATIOM AND HEALTH INSURANCE P2,400

PERSONAL EXEMPTION 50,000

ADDITIONAL EXEMPTIONS 75,000

P127,400
TOTAL DEDUCTION
 SOLUTION:

2. TAXABLE INCOME OF MR. IBANEZ IS COMPUTED AS FOLLOWS:

P300,000
BASIC SALARY
13TH MONTH PAY AND OTHER BONUSES
(P107,000 LESS P82,000 25,000

TOTAL COMPENSATION INCOME P325,000

LESS: DEDUCTIONS

Premium Hospitalization And Health Insurance P2,400

Personal Exemption 50,000

Additional Exemptions 75,000 P127,400

P197,600
TAXABLE INCOME
 SOLUTION:
3. AMOUNT OF TAX DUE IS COMPUTED AS FOLLOWS:

COMPUTATION OF INCOME TAX DUE:

OR
(Refer to Schedule of Tax Rates found on page 143)
Line 5 – over P 140,000 but not over P250,000
On P140,000 taxable income
P 22,500
Excess x 25% of P57,600 14,400

P 36,900
Amount of Tax Due
 SOLUTION:
4. HE WILL USE BIR FORM 1700

To have continuity with our discussion, let us assume:

Gems Appliance Plaza withheld or deducted withholding tax taken from the salary of Mr. Ibanez in
the amount of P2,500 per month and remit the same to Bureau of Internal Revenue. The amount of
tax due will be reduced by P30,000 (2,500 x 12 month) computed as follows:

Amount of tax due P36.900

Less: Withholding Tax 30,000
Amount payable to BIR P 6,900
 SOLUTION:

Gems Appliance Plaza, the withholding tax agent will use BIR form 2016 in remitting the withholding
tax. Mr. Ibanez will still use BIR Form 1700. However, effective taxable year 2002 substituted filing
system ensued. The withholding tax agent shall see to it that the amount it withholds from the
salaries will equal to the amount of tax due to said employee. BIR Form 1604-CF will be used in
substituted filing.

Amount of tax due P36.900

Less: Withholding Tax 36,900
Amount payable to BIR -0-