1.

Discuss the exclusion condition of termination benefits

When an employee is terminated or separated from his employment as part of the retrenchment
program of the company, it is implied that it is beyond the control of the terminated employee.
Consequently, the benefits received due to the termination shall be exempted from basic tax and
withholding tax. However, the employee’s salaries and the 13 th month pay and other benefits in excess
of the 90,000 ceiling are not exempted.

2. Discuss the rules on taxation of prizes

Unless exempt by the law, Prizes and other winnings are taxable. Prizes that are exempt from tax are
prizes or awards won or received by Religious, Charitable, Educational and other groups or organization
with the same nature. Likewise, the prizes and awards granted to athletes in local or international sports
competitions and tournaments, whether held in the country or abroad. Considering PCSO/Lotto winnings
here are the instances where an individual will be exempted from tax:

 received by citizens and resident aliens not exceeding P10,000

 PCSO/Lotto winnings received by NRA-ETB, regardless of the amount,

Prizes and winnings that are subject to basic tax are the prizes received outside the country by an
individual, prizes received by a corporation, and prizes received within the country amounting to P10,000
or less.

Prizes and winnings that are subject to FWT at 20% are prizes that received by an individual within the
country exceeding P10,000. Moreover, PCSO/Lotto winnings exceeding P10,000 received by citizens
and resident aliens. However, prizes and other winnings received by NRA-NETB are subject to 25%
FWT.

3. Enumerate the exclusions from gross compensation income in the determination of gross
taxable compensation income.

There are two reasons why there are exclusions in computing for the taxpayers taxable income. First, it
is exempted by virtue of law and second, it did not meet the definition of an income.

As amended under RR 10963, Section 32 of tax code included the following as items excluded from
gross income:

 Life insurance
 Amount received by the insured as a return of premium
 Value property acquired by gratuitous transfer
 Compensation for injuries or sickness
 Income exempt under treaty
 Retirement benefits, pensions, gratuities, etc.
 Miscellaneous items