General rule

- all income subj to tax unless exempted by law

- exempt are law disfavored, construed against taxpayer

Sources of Exclusions
- Consti, Laws, and Treaties

Taxes other than Income Taxes

- exlclusions may still be subj to other type of tax

EXCLUSIONS
- earned but not included in GI
- under section 32 (b) RA 8424 are:

a) Proceeds of Life Insurance

- paid to heirs/beneficiaries upon death, whether single sum
- if under agreement to pay interest then it is INCLUDED.
EXC: if proceeds retained by insurer > interest is taxable

b) Amount received by insured as RETURN OF PREMIMUM

- amt received as return of prem paid under life insurance, endowment, annuity
contracts.
- outliving the period policy - designate the taxable and non

c) Gifts, Bequests, and Devises

- value of property acquired by gift or descent.
- if property used to earn income - INCLUDE thereon

d) Compensation for Injuries or Sickness

- amt received thru health insurance, accidents, plus AMT of any damages received
wether by suit or agreement.

e) Income exempt under Treaty

f) Retirement ben., Pensions, Gratuities & Others

- under RA 7641, whether indiv or corporate as long as:
a) there is reasonable private ben. plan by employer
b) Been in service for 10 years under same employer
c) Not less than 50 yrs of age at time of retirement
d) Benefits granted shall be availed only ONCE
e) Amt received by official/by heirs as consequence of separation from service due
to death/sickness/disability
caused BEYOND the control of the official
- Social security/ other similar ben > RC/NRC/RA
- payment of ben. due or about to - to any person residing in PH under laws of US
administed by US Vet Admin.
- Ben received under SSS in accord w/ RA 8282
- GSIS (RA 8291)

g) Prizes and Awards

-a) In recog of religious, charitable, scientific, educational, arts, literacy or
civic achievement ONLY IF
i) he was selected without any action on his part to enter the contest; and
ii) not required to render substantial future services as condition to receive the
prize

-b) Sports competition awards held by NSA

h) 13th Month pay and Other Benefits

- not exceeding P90,000
- ben. not covered by PD no. 851
- de minimis ben. (excess is added to 13th month pay)
i) unused vacation leave credits (private employee) 10 days
ii) unused vacation/sick leave of govt officials - no limit
iii) medical allowance to depndent employee - P750/250/month
iv) rice subsidy - P2,000 or 1 sack of 50kg per month
v) uniform - not exceeding P6,000 per annum
vi) Medical cash ben. - not over P10,000 per annum
vii) laundry - not over P300 per month
viii) employee achievement - in form of tangible other than cash/gift certificate
not over P10,000
ix) gifts given during christmas/anniv - not over P5,000
x) meal allowance - not over 25% of basic minimum wage
xi) travel abroad - tickets should be business/economy (1st class 30% taxable)
hotel accomodation $300 per day and inland travel
xii) Productivity bonus - not over P10,000 per employee per year given there is
collective bargain agreement.

i) Gains from sales of bonds, debentures & other cert of indebtedness

- provided it has MATURITY OF MORE THAN 5 YEARS

j) Gains from redemption of shares in mutual fund

k) Wages of MWE
l) Income derived by Foreign Govt
- from investments, loans, stocks, securities, interest on deposits in PH by
foreign govts.
m) Income derived by Govt or its Political Subdivisions