Exclusion from Gross Income

A. Proceeds of life insurance amount

- Excess of proceeds and tax basis = add to GI
- Return of capital
B. Amount received by the insured as a return of premium
C. Gift, bequest, devise or decent
D. Compensation for injuries or sickness
- Law pertains to physical injury rather than injury to rights or property
- Recovery for lost salary = recovery of lost profits, item of GI
E. Income exempts under treaty
- International comity
F. Retirement benefits, pension, gratitude’s
1. Retirement benefit under RA 7641 and those received by officials and employees of
private firms
Requisite of exemption;
a. First time = retirement benefits exemption
b. Services of 10 years in company
c. 50 years old = retiring employee
d. Reasonable private benefit plan ( pension, gratuity stock bonus or
profit-sharing plan maintained by employer)

Note: to be exempt, RBP = trusteed and 10 yrs cumulative service period

2. Separation or Termination
Requisite of exemption:
1. Due to job-threatening, sickness, deaths, or other physically disability
2. Beyond control of the employee (cannotes involuntariness on the part of
employee)
A. Redundancy
B. Retrenchment
C. Closure of employer’s business
D. Sickness or death of the employee

Note: Tax exemption = CTE (Certificate of exemption) from the BIR and filed RDO. Not control by
employee = exempt

DOES NOT EXTEND TO

a. Backwages or illegal deductions = unpaid salary

b. Terminal leave pay or communication
3. Social Security Benefits, Retirement Gratuities and other similar benefits
from foreign government agencies and other institutions, private or public
- Received by RC/A or NRC/A = settle permanently in the PH
- Benefits earned from abroad
4. United States Veteran Administrative (USVA)
- Administrative benefits under law of US
 G. Miscellaneous Income
1. Income from FC and FCOnC corp
2. Income = gov and its political subdivision
3. Prizes and awards in recognition of religious, charitable, scientific, educational, artistic,
literary, or civic achievements
Example of prizes:
a. Nobel Prize Award
b. Gawad ng sining award
c. CNN hero of the year
d. Most outstanding citizen
4. Prizes and awards in athletic sports competitions
5. Contributions to SSS, GSIS, Philhealth, Pag-ibig or HDMU and union dues
6. Contributions to PERA (Personal Equity Requirement Account
7. PERA investment income and distribution
8. 13th month pay and other benefits received by officials and employees of publis or private
entities not exceeding 90k
9. Gain from sale of bonds, debenture, or other certificate of indebtedness (mortgaged) with a
maturity of more than 5 years
10. Gains realized from redemption of shares in a mutual fund company by the investor
- Mutual fund company = open-end and close-end investment (Investment Company Act)

OTHER EXEMPT INCOME UNDER THE NIRC AND TRAIN LAW

1. Minimum wage and certain benefits of minimum wage earner

a. Holiday pay
b. Overtime pay
c. Night shift
d. Differential pay
e. Hazard pay
2. Income of BMBE
- Certificate of authority
a. Sari sari
b. Laundry shop
c. Bread shop
- Do not exceed 3M
3. Income of cooperatives
- Accumulated reserves do not exceed 10M
- CTE or certificate of Exemption
4. Income of non-stock, non-profits entities
5. Income of qualified employee trust funds

INCOME OF SELF EMPLOYED OR PROFESSIONALS WHO OPTED TO BE TAXED AT 8% INCOME TAX

- Shall be excluded in GI subject to RIT

- In lieu of the 3% percentage tax and the progressive income tax
EXCLUSIONS = not included in the amount of reportable gross income in the ITR

DEDUCTIONS = initially added to Gross Income but subsequently deduct against GI in the ITR