Republic of the Philippines

President Ramon Magsaysay State University

College of Accountancy and Business Administration
(Formerly Ramon Magsaysay Technological University)
Iba, Zambales, Philippines
Tel/Fax No.: (047) 811-1683

College/Department College of Accountancy and Business Administration

Course Code BA Core 3

Course Title Income Taxation

Place of the Course in the Program Major Subject

Semester & Academic Year First Semester AY 2020-2021

CHAPTER 7-EXCLUSIONS FROM GROSS INCOME

Introduction
This chapter discusses the items of income that are excluded from gross income, hence not subject to
income tax under the NIRC. It also includes discussions of other exempt income under special laws, treaties, or
contracts.

Intended Learning Outcomes

After this chapter, readers must be able to demonstrate:
1. Mastery of the list of exclusions from gross income
2. Comprehension of exclusion conditions or limitations of certain items of income
3. Knowledge of the list of entities exempt under the NIRC and special laws

Discussion

EXCLUSIONS FROM GROSS INCOME

Exclusion from gross income re income which will not be subject to income tax.
They are not included in gross income subject to regular tax, capital gains tax, or final tax.

Under sec.32 (B) of the NIRC, the following items shall not be included in gross income and shall be exempt from
taxation:
A. Proceeds of life insurance policy
B. Amount received by the insured as a return of premium
C. Gifts , bequest, devise, or descent
D. Compensation for injuries or sickness
E. Income exempt under treaty
F. Retirement benefits, pensions, gratuities, etc.
G. Miscellaneous items
1. Income in the Philippines of the foreign government or foreign government owned and controlled
corporations
2. Income of the government and its political subdivisions

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 3. Prizes and awards in recognition of religious, charitable, scientific, educational, artistic, literary, or
civic achievements
4. Prizes and awards in the athletic sports competitions
5. Contribution to GSIS, SSS, Phil Health, Pag-ibig, and union dues
6. 13th month pay and other benefits not exceeding P90,000
7. Gains from sale of bonds, debentures, or certificates of indebtedness with maturity of more than 5
years
8. Gains from redemption of shares in mutual fund

EXCLUSION FROM GROSS INCOME

Proceeds of a life Insurance policy - The proceeds of life insurance policies paid to the heirs of beneficiaries upon
the death of the insured, whether in a single sum or otherwise; however, if such amounts are held by the insurer
under an agreement to pay interest thereon, the interest payments shall be included in gross income. Life is regarded
as a capital item with infinite value. Hence, the proceeds of life insurance is a return of capital.

Amount received by the insured as a return of premium - The amount received by the insured as a return of
premium paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity
of the term mentioned is a the contract upon surrender of the contract.

The amount received by the insured as a return of premium on any insurance contract is a return of capital; hence, it
is excluded from gross income.

Illustration 1: Life insurance contracts

Selena is insured in a P1, 000,000 life insurance policy with annual premium payments of P20, 000 for 10 years. If
she outlives the policy after the 10th year, she will be paid a P500, 000 maturity value.

Scenario 1
Selena died on the 8th year of coverage and her heirs collected the P1, 000,000 proceeds. The entire insurance
proceeds of P1, 000,000 is not taxable.

Scenario 2
Upon the death of Selena, the insurance company negotiated for an extension of the payment of the proceeds
wherein the insurance company shall pay P1, 050,000 on the extended payment. The P1, 000,000 proceeds will not
be taxed upon collection, but the P50, 000 excess representing interest in a taxable item of gross income.

Scenario 3
Selena outlived the policy and collected the maturity value of P500, 000.

The total proceeds shall be analyzed as:

Total proceeds P 500,000

Return of premium (P20, 000 x 10 years) 200,000
Return on capital (item of gross income) P 300,000

Scenario 4
After 6 years of payment, Selena assigned the policy to Harith who paid him P130, 000.
Harith continued the premium payments for two more years after which Selena died.
Harith collected the P1, 000,000 insurance proceeds.

Illustration 2: Life insurance of the company officers

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Selena is insured by her employer corporation for P1, 000,000 with the employer corporation as the beneficiary.
Selena subsequently died, and the corporation collected the P1, 000,000 life insurance proceeds.

The entire proceeds under this insurance arrangement are held within the purview of the NIRC exemption; hence, it
is not taxable.

Property Insurance contracts

The proceeds of property insurance contracts in excess of the tax basis of the property lost or destroyed is a taxable
return on capital.

Illustration: Property Insurance

Shera company secured a fire insurance covering the entire P2, 000,000 fair value of its office building. The
building was completely destroyed by the fire when the depreciated cost (tax basis) of the building was P1, 800,000.
Shera recovered the P2, 000,000 insurance proceeds.

The total proceeds shall be analyzed as follows:

Total proceeds P 2,000,000

Return of premium (P20, 000 x 10 years) 1,800,000
Return on capital (item of gross income) P 200,000

C. Gifts, Bequests, and Devises or Descent – the value of property acquired 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 transfer of divided interest, shall be included in gross income.

Illustration
Clark received a restaurant business as a gift on April 1, 2015. On that date, restaurant had total properties
amounting to P400, 000 including P50, 000 cash income earned since January 1, 2015. The restaurant posted an
additional P150, 000 cash income from April 1, to December 31, 2015.

The transfer of business properties worth P400, 000 to mark is a gratuity subject to transfer tax, not income tax.
However, the P50, 000 donated income shall be included in gross income, but in the income tax return of the donor.
The P150, 000 income of the donated property after the perfection of the donation is included as item of gross
income in the tax return of Clark, the donee.

Gift distinguished from exchange

The transferor’s intention or motive must be evaluated in determining whether a transfer is a gift or an exchange.
Gifts are characterized by pure liberality or disinterested generosity and are given without any consideration. An
exchange always involves a consideration.

Employment Gratuities
Gratuities given under an employer-employee relationship are normally treated in exchange for services rendered by
employees. Hence, they are subject to income tax. The transfer of properties by the employer to managerial or
supervisory employees is generally subject to fringe benefit tax. Christmas or major anniversary gifts granted by the
employer to employees are de minimis benefit subject to income tax.

D. Compensation for injuries and sickness - amount 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.

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Illustration 1
Drake was hit by a jeepney. He spent 3 months is in the hospital and paid P100, 000 for hospitalization expenses. He
sued the jeepney driver and was awarded by the court a total indemnity of P340, 000 divided as follows: P200, 000
indemnity for his pain, anguish and sufferings, P40, 000 for his lost salaries, and P100, 000 as reimbursement for his
hospital bills.

The P200, 000 indemnity and the P100, 000 reimbursement for hospitalization expenses are non-taxable returns of
capital. Note that health is a capital item with infinite value. However, the 40,000 reimbursement for lost salary is a
recovery of lost profit; hence, an item of gross income.

Illustration 2
Mr. Lucky was driving his brand new P1, 200,000 car when a truck bumped it resulting to the total wreckage of his
car. Luckily, he managed to escape the incident unharmed. He received P1, 300,000 indemnity from the incident.

The P100, 000 indemnity is an item of gross income. Note that the law pertains to personal physical injury rather
than injury to rights or property.

E. Income exempt under treaty

Income items that are excluded by international agreement to which the Philippines government is a signatory are
excluded from income tax. It must be recalled that treaty agreements override provisions of our revenue tax laws in
case of conflict under the exemption doctrine of international comity.

F. Retirement Benefits, Pensions, Gratuities and other benefits

1. Retirement benefits under RA. 7641 and other those received by officials and employees of private firms in
accordance with a reasonable private plan maintained by the employer
Requisites of exemption:
a. The employer maintains a reasonable private benefit plan.
b. The retiring official or employee has been in the services of the same employer for at least ten (10)
years.
c. The retiring employee is at least fifty (50) years of age at the time of retirement.
d. This is the first time availment of retirement benefit exemption.

A reasonable private benefit plan means a pension, gratuity, stock bonus or profit sharing plan maintained by an
employer for the benefit of some for all of his officials or employees, wherein contributions are made by such
employer for the officials or employees, or both for the purpose of distributing to such officials and employees the
earnings and principal of the fund thus accumulated and wherein it is provided in said plan that no time shall any
part of the corpus or income of the fund be used for, or be diverted to, any purpose other than for the exclusive
benefit of the said officials and employees.

To be exempt, the retirement benefit plan must be a “trusted” plan where the fund to held under the management for
a trustee fee from both employer and employee control.

The 10-year service period requirement pertains to cumulative years of employment with the same employer. A
requirement for continuous employment would be prejudicial to working women.

Illustration 1
Rina was employed in 1990 when she was 25 years old. In 2010, she availed of the early retirement program of her
employer.

Rina satisfied the 10-year cumulative employment requirement but she is only 45 years old (i.e. 25+ {2010-1990})
at the time of her retirement. The retirement benefit is taxable. It is an inclusion in gross income as compensation
income.

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Illustration 2
Assume that Rina joined another employer and worked therein for 7 more years after which she retired from her
employment.

Although Rina is 50 years old by them, she is only 7 years under the employ of her second employer. The second
retirement benefit is also taxable as compensation income since she failed the residency requirement.

Illustration 3
Assume instead that Rina was 30 years old when she joined her first employer and work therein for 20 years after
which she retired at 50. She immediately joined another employer and retired after 10 years of service when she was
60 years old.
The first retirement benefit from the first employer is exempt since Rina is 50 years old and has rendered at least 10
years of service (ie., 20 years). The second retirement benefit from the second employer is taxable even if she met
the residency and age requirements since these retirement benefit exemption can be availed of only once in a
objective.
2. Separation or Termination
Requisite of exemption:
1. The separation or termination must be due to job threatening sickness, deaths, or other physical disability,
and
2. The same must be due to any cause beyond the control of the employee or official such as:
a. Redundancy
b. Retrenchment
c. Closure of employer’s business
d. Employee lay-off
e. Downsizing of employer’s business
f. Sickness or death of the employee
The phrase “beyond the control of the employee” connotes involuntaries on the part of the employee. In other
words, the separation must not be of his own making.
Abandonment of office such as the registration and subsequent appointment to another office is considered as a
voluntary separation and does not fail within the purview of the phrase “for any cause beyond the control of such
official or employee”. (BIR Ruling 054-2001)
The exemption of termination or separation benefits does not extend to:
1. Backwages or illegal deduction repaid by the employer upon termination (BIR Ruling 003-2004)
2. Terminal leave pay or the commutation of accumulated unused leave credits (BIR Ruling No. 199-2011)
To avail of the tax exemption, the employee or his heirs shall request for a ruling or certificate of exemption (CTK)
from the BIR. The request for a CTE and other required documents shall be filled at the RDO where the employer is
registered.

Illustration 1
Paul is an employee of Goldfish Company which closed its business during the years. Paul’s last paycheck shows
the following details.
Unpaid salary in the last two months P 30,000
Current month salary 15,000
Separation pay 100,000
Total pay P 145,000

The current month salary and the P30, 000 backwages are subject to income tax. The P100, 000 separation pay is
an exclusion from grass income, hence, not taxable.
Illustration 2

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Alpha’s employer was downsizing its business operations. Alpha was identified among others to be laid off. To
avoid implications of implications of inefficiencies on his part. Alpha filed a resignation letter to the company and
received a separation pay of P120, 000.
The separation pay is taxable as compensation income since the underlying reason of the severance of the
employment (ie. resignation) is within the control of the employee. Alpha got terminated without resigning, the
separation pay would be exempt.
Illustration 3
Mr. Wonderful was diagnosed to have a sexually transmitted disease (STD) Due to this in employer decided to
terminate his service but granted him P1, 000,000 separation pay.
The P1, 000,000 separation pay in taxable as STD does not normally render the employer incapable of working.
3. Social Security Benefit, Retirement Gratuities, and Other similar benefits from foreign government agencies
and other institutions, private or public, received by resident or non-resident citizens or aliens who come to
permanently in the Philippines.

Illustration
Darius was an OFW employed by Microsoft Corporation in the USA. Darius retired and returned to permanently
settle in the Philippines. He is paid a $2,000 monthly from Microsoft’s pension fund and another $800 monthly
benefit from the US social security benefit.
Both the pension and the social security benefits are exempt. Note that thee benefits were earned abroad when the
taxpayer was a non-resident. Under situs rule, the foreign income of non-residents I not taxable in the Philippines.
This holds true even if the taxpayer subsequently receives the income as a resident of the Philippines.
3. United States Veterans Administration (USVA) - administered benefits under the laws of the United
States received by any person residing in the Philippines.
Illustration
Mr. Pemberton is retired US serviceman from the Iraqui war. He married a beautiful Filipina an settled in the
Philippines. He is receiving a $1,000 monthly benefit from the USVA.

The USVA benefit is excluded in gross income. The same rule applies to USVA benefits for beneficiaries of
Filipino veterans who fought under the American flag in World War II.
5. Social Security Systems (SSS) benefits under RA 8282
6. GSIS benefits under RA 8291 including retirement gratuity received by government and officials and employees.
G. Miscellaneous items
1. Income derived on investments in the Philippines in loans, stocks, bonds, or other domestic securities, or
from interest on deposits in banks in Philippines by:
a. Foreign governments
b. Financing Institution owned, controlled, or enjoying refinancing from foreign governments
c. International or regional financial institutions established by foreign governments

These are exempt under the exemption doctrine of International comity.

2. Income derived by the government and its political subdivisions from:

a. Any public utility or
b. Exercise of essentials government function

Government agencies and instrumentalities

The general rule with government agencies and instrumentalities is exemption because of their public service nature.
However, taxation applies when they engage in income-producing activities which are proprietary or commercial in
nature

This exemption does not extend to government-owned and controlled corporations (GOCCs). GOCCs are generally
taxable as regular corporations because their operations are proprietary in nature.

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3. Prizes and Awards made primarily in recognition of religious, charitable, scientific, educational, artistic,
literary, or civic achievements but only if:

a. The recipient was selected without any action on his part to enter the contest or proceeding; and
b. The recipient is not required to render substantial future services as a condition to receiving the prize or award.

Prizes of this kind partake the nature of a unilateral transfer and hence, exempt from income tax. These transfers are
also exempt by law from transfer tax. If the recipient exerted effort for the grant of the prize such as joining a contest
or is required to rendered service for its grant, the prize would be construed as received in an exchange; hence,
taxable as income.

Example of exempt prize:

a. Nobel prize award
b. Gaward ng Sining Award
c. CNN Hero of the year
d. Most Outstanding Citizen

4. Prizes and awards in sports competitions granted to athletes:

a. In Local or International competitions and tournaments;
b. Whether held in the Philippines or abroad; and
c. Sanctioned by their national sports associations.

5. Contributions for GSIS, SSS, Phil Heath, Pag-ibig and Union dues of Individuals

These pertain to the employee share in the premium contributions to GSIS, SSS, Phil Health, Pag-ibig and union
dues. The portion of the salary thus contributed is exempt from income tax.

Under RMC NO. 21-2011 the exclusions pertains only to the mandatory or compulsory monthly contribution.
Voluntary Contributions to Pag-Ibig II, GSIS OR SSS in excess of the mandatory monthly contribution are taxable.
Note that Pag-Ibig is now called the Home Development Mutual Fund or HDMF.

Illustration

An employee has a gross compensation income of P 400,000 IN 2020. His Employer deducted P5,000 SSS, P4,000
Phil Health P3,000 HDMF P2,000 union dues and P80,000 creditable withholding tax.
Thus, the gross income subject to regular tax shall be computed as follows:

Gross Compensation Income P 400,000

Less: Excluded compensation income or contributions
Contribution to SSS P 5,000
Contribution to Phil Health 4,000
Contribution to HDMF 3,000
Union dues 2,000 14,000
Gross Taxable Compensation income P 386,000

Note: The creditable withholding tax is not an exclusion in gross income but a tax credit which is deductible against
the income tax due of the taxpayer.

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The employers shares on SSS, GSIS, Phil Health, and HDMF contributions is not exclusion from gross income but
an item of deduction against gross income.

6. 13th month pay and other Benefits received by officials and employees of public or private entities not
exceeding P90, 000.
7. Gains from sale of bonds, debentures, or other certificate of indebtedness with a maturity of more than 5
years.
This exemption is grounded upon the sane assumption that long-term indebtedness is diverted to the financing of
long term projects which beneficial to the development of the country.
The term “gain” however, does not include “interest.” (Nippon life Insurances Company of the Philippines vs. CIR,
CTA Case No. 6142)
Illustration
On September 1, 2020, an individual Taxpayer sold a 6-year term bond investment for the P1,100,000. These bond
bear 8% interest payable every December 31 and were previously acquired at P1,000,000 face value on January 1,
2020.

The gain on sale will be computed as follows:

Selling price P1,100,000
Less: Cost of bond sold 1,000,000
Interest accrued (P1M X 8% x 9 mos. /12 mos.) 60,000
Gain on sale P 40,000

The gain from the sale of the long term bond is exempt because the bonds have a maturity period or more than 5
years. However, the accrued interest income is an item of gross income subject to regular income tax.

8. Gains realized from redemption of shares in a mutual fund company by the investor
The term Mutual fund Company shall mean an open-end and close-end investment company as defined under the
investment company Act.

Mutual fund pool the money invested by different investors and invest the money to earn investment income which
shall add up to the net assets of the fund. A participating Investors must purchase participation shares from the fund
at their Net Asset Value (NAV). Upon redemption his participation shares, the investor gains or losses by his
proportionate share in the increase or decrease in the Net Asset Value of the Fund.

Illustration
A taxpayer bought 10,000 shares from Golden dragon Mutual fund at P120 NUV per share. The tax payer redeemed
his shares with the NAV per share was P180.
The P600,000 gain, computed as [(P180-P120) x 10,000),on redemption is excluded from gross income; hence;
exempt from taxation.
The exemption is apparently intended to mitigate double taxation. Most of the Item of Income of Mutual Funds is
subject to final tax at source. The subsequent distribution of these to the investors at redemption should no longer be
subject to income tax. On the other hand, the exemption may have been intended to promote the growth of mutual
funds which are widely regarded as key participants in providing liquidity in most financial markets.
OTHER EXEMPT INCOME UNDER THE NRC AND SPECIAL LAWS
1. Minimum wage and certain benefits of minimum wage earners
2. Income of Barangay Micro-Business Enterprise act (RA 9178)
3. Income of Cooperatives (RA 9520)
4. Income of non-stock, non-profit entities
5. Income of qualified non-profit employee trust funds

Minimum Wage Earners

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A minimum wage earner is an individual recipient of a minimum wage as fixed by the Regional Tripartite
Productivity wage Productivity board of the Department of Labor and Employment. A minimum wage earner is
exempt from the income tax on the minimum wage including the holiday pay, Overtime pay, Night shift pay
differential pay and hazard pay.
Barangay Micro-Business Enterprise (BMBE)
A BMBE is a business entity or enterprise engaged in the production, processing or manufacturing of products or
commodities, including agro-processing, trading and services,
whose total assets including those arising from loans but exclusive of the land on which particular business entity’s
office, plant and equipment are situated, do not exceed P3,000,000.
The tem service excludes those rendered by licensed professionals and partnership corporations engaged in
consultancy, advisory and similar service which are essentially cared out through license professionals.
A BMBE shall include any individual owning such business entity or enterprise, partnership, cooperative,
corporation, association, or other entity incorporated and/organized and existing under Philippine laws and
registered in the office of the treasurer of a city or municipality.
Revocation of BMBE Tax Exemptions
The income tax exemption of a BMBE may be revoked for any of the following reasons:
Transfer of place business
Value of assets exceeds P3, 000,000
Voluntary surrender of the certificate of Authority
Death of the registered of the individual owner; violation or non-compliance with the provision of RA 9178
Merger or consolidation with an entity which is not eligible to be a BMBE
Sale or transfer of the BMBE if a sole proprietorship without prejudice to other transferee applying of registration
Submission of fake falsified documents
Retirement from business, or cessation/suspension of operation for one year
Making false or omitting required declarations or statements

Cooperatives
Cooperatives that transact business purely with members are exempt from all taxes and fees.
Cooperative that transact business with non-members are likewise exempt from all taxes and fees with their
accumulated reserved and undivided savings do not exceed P10M. Otherwise, the amount of surplus allocated for
interest on capitals is subject to regular tax.
However, the income of any cooperatives from non-related sources is fully taxable to regular tax.

Non-Stock and Non-profit Entities

Non-stock entities that are not organized for profit are exempt from income tax on their income from operations.
However, their income from unrelated sources in taxable.

Qualified Employee’s Trust Fund

An employee’s trust fund which forms part of a pension, stock bonus or profit sharing plan of an employer for the
benefit of some or all his employees is exempt from any tax under the NIRC.

Conditions for exemptions of employee trust fund

Conditions are made to the trust by such employer, or employees, or both for the purpose of distributing to such
employees the earnings and principal of the fund accumulated by the trust in accordance with such plan.
The asset of the fund shall not be diverted for other purpose other than the exclusive benefit of the employees.

QUALIFICATION OF EXEMPT ENTITIES

Tax incentive or exemption is highly disfavored in law. It is not automatic. Taxpayers with exemption or tax
incentives under any existing laws or contracts. Must establish their entitlement by filling required documents with

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the BIR. BMBEs need to secure a Certificate of Authority. Cooperatives need to secure a Certificate of tax
Exemption/Ruling (CTE). Once exemption is established, it only operates prospectively.

EXCLUSIONS VS. DEDUCTIONS

Exclusion from gross income are not included in the amount of reportable gross income in the income tax return.
The amount of the deduction is initially included in the amount of gross income but is separately presented as a
deduction against gross income in the income tax return.

Activity
True or False.
1. Benefits of veterans of war or retired US army personnel are excluded in gross income.
2. GSIS and SSS benefits are included in gross income to the extent they exceed P30,000.
3. The income of government-owned and controlled corporations is an item of gross income.
4. Prizes awarded upon the condition that the recipient shall render specified future services is an
item of gross income.
5. Prizes from contests are included in gross income subject to regular income tax.
6. The employer share to SSS, Philhealth and Pag-ibig contributions are exclusion in gross income.
7. The gain on sale of long-term bonds with a maturity of five years is an exclusion in gross
income.
8. The interest income from any bond, short-term or long-term, is an item of gross income.
9. Cooperatives that transact business only with members will, in no case, be subject to income tax.
10. Cooperatives, regardless of their classifications, are taxable on income from their unrelated
activities.

1.Ms. El surrendered her life insurance policy and received a cash surrender value of P800,000 after contributing
P700,000 in annual premiums. Determine the total exclusion in gross income and the inclusion in gross
income,respectively.__________
2.Mr. John died. His heirs collected the P2,000,000 proceeds of his life insurance policy. Mr. John previously paid a
total payment of P500,000 in premiums. What is the exclusion in gross income and inclusion in gross income,
respectively?_________________
3.Mr. Zara collected the P1,000,000 insurance proceeds of Mr. Pantuk which he bought from the latter for P400,000.
Before the death of Mr. Pantuk, Mr, Zara paid a total premiums of P200,000. What is the exclusion in gross income
and inclusion in gross income, respectively?_______________
4.Mr. Bean collected the P5,000,000 fire insurance proceeds of his building which was destroyed by fire. The
building had a tax basis of P4,500,000 at the occurrence of the fire. What is the total exclusion in gross income and
inclusion in gross income, respectively?______________
5.Mr. K insured his crops for a P1,000,000 insurance cover against calamities. He paid P100,000 insurance
premium. What is the amount to be included in gross income?_____________

6. Ms. Henrieta retired from her job after 25 years of service. She joined the company at the age of 23 and was
promoted from an accounting clerk to VP Finance. She was paid P2,000,000 total retirement pay from the
employer’s contributory pension plan which was duly registered with the BIR. Out of the total proceeds, Ms.
Henrieta contributed P600,000. This was her first retirement from employment. How much is excluded in gross
income?______________
7.The following relates to the compensation income of Ms. Eva in 2018:

Compensation P900,000
Contributions to SSS, Philhealth and HDMF:

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-mandatory contributions 125,000
-voluntary contributions 150,000
Creditable withholding taxes 190,000

Employer’s share in SSS, Philhealth and HDMF 105,000

What is the total exclusion in gross income?____________

8.In 2017, Ms. Dinah invested in the 10-year bonds of Compostela Mining Corp. P8,000,000. She disposed the
investment in 2019 for a total consideration of P8,500,000 inclusive of the P400,000 accrued interest. What is the
inclusion in gross income and exclusion in gross income, repectively?_____________
9.Mr. Uso is a minimum wage earner. He was paid the following benefits in 2018;

Minimum wage P200,000

Holiday pay 10,000
Overtime pay 20,000
Night shift differential pay 12,000
Hazard pay 12,000
What is the total exclusion in gross income?________________

10. The following income relates to a proprietorship registered as BMBE:

Gross income from sales P400,000

Dividend income-domestic 9,000
Interest on deposits 6,800

Compute the total exclusion in gross income subject to regular tax.____________

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