GROSS INCOME

Income- in general, is the gain from capital, labor, or both combined, including profit gained through a
sale or conversion of capital assets.

Gross Income- means total income of a taxpayer subject to tax. It includes gains, profit, and income
derived from source whatever, whether legal or illegal. It does not include income excluded by law, or
which are exempt from income tax. (Gross income siya yung bahagi ng income subject sa tax. They’re
excluded or subject sila sa ibang klaseng tax at hind income tax and they are what we called Gross
Income.)

Taxable Income means all pertinent items of gross income specified by the tax code less deduction if
any authorized for such types of income by the tax code or other special laws. (

ITEMS OF GROSS INCOME

1. Compensation for services in whatever form of paid, including but not limited to fees, salaries,
wages, commission and similar items
2. Gross income derived from the conduct of trade or business or the exercise of a profession
3. Gains derived from dealing in property
4. Interest Income
5. Rents
6. Royalties
7. Dividends
8. Annuities
9. Prizes and Winnings
10. Pension
11. Partner’s distributive share from the net income of a general professional partnership

Income excluded from the IRS's calculation of your income tax includes life insurance death benefit
proceeds, child support, welfare, and municipal bond income. The exclusion rule is generally, if your
"income" cannot be used as or to acquire food or shelter, it's not taxable.

Compensation Income – all remuneration for services performed by an employee for his/her employer
under employer-employee relationships, unless specially excluded by the code. (Para mag arise or
magkaroon ng compensation dapat mag exist ang relationship ng employer(amo)-employee
(mangagawa, siya yung pinapasweldo, siya yung nagtratrabaho). The term used to designate
remuneration is immaterial (hindi daw ganun ka importante kung ano yung terminology na ginamit dun
sa remuneration). Thus, salaries, wages, emoluments and honoraria, allowance, commission (e.g.,
transportation, representation, entertainment, and the like) fees including director fees if the director is,
at the same time an employee of the employer/corporation, taxable bonuses and fringe benefits except
those which are subject to fringe benefit tax, taxable pension and retirement pay and other income of
similar nature constitute compensation income.

The timing or the basis upon which the remuneration is paid is immaterial in determining whether the
remuneration constitute compensation. Thus it may paid on the basis of piece-work or a percentage of
profits and may be paid daily, weekly, monthly and annually.
Forms of Compensation
1. Compensation paid in kind
2. Living quarters and meals
3. Facilities and privilege of relatively small values
4. Tips and gratuities
5. Pension, retirement, and separation pay
6. Fixed or variable transportation, representation and other allowances
7. Vacation and sick leave allowances
8. Deduction made by employer from compensation of employee
9. Remuneration for services as employee of NRA individual/foreign entity
10. Compensation for services performed outside the Philippines

NET INCOME
Refers to the amount earned by any person from the gross earnings less the total deductions.
Example of deduction; income tax, SSS or GSI, PhilHealth and pag ibig contributions.
The deductions can be a fixed amount or a percentage of the basic salary.