so for today in this video I am going to talk about the inclusions of gross income or those included and

those taxable item for gross income.

gross income

- which means that the total income of taxpayer subject to tax which includes gains, profits and income
derived from any source whether legal or illegal. so, time and time again we've already established but
when we see gross income these are the income of a taxpayer that accrues to them which gives a return
on the capital for these tax figures whether coming from a legal source or an illegal source.

- The codal definition of gross income enumerates 11 items constituting gross income, which are the
following:

1. compensation for services in whatever form paid

2. gross income derived from the conduct of trade business or exercise of profession

3. gains derived from the dealings in properties;

4. interest;

5. rents;

6. royalties;

7. dividends

8. annuities;

9. prices and winnings;

10. pensions and

11. partner's distributive share from the net income of a general professional partnership

okay so these are the items listed in the Codal definition of your cross income however, it should be
noted that these listed items are not only items of gross income since the definition of gross income
comes with a “catch-all provision” for all income derived from whatever sources that are:

1. not subject to final tax, capital gains tax, or any special regimes of tax / special tax regimes
2. and those are not excluded or exempted by law, treaty or contract from taxation

so basically all items that accrue to the taxpayer that gives a benefit to the taxpayer we are considered
as gross income as long as being do not fall into these categories.

1. compensation income generally includes all remunerations received under an employer-

employee relationship.
 Employer is the person, agency, firm, organization, business, corporation, or the government for
whom an individual, called the “employee”, performs any service of whatever nature.

Key elements:

a. Screening to hire employees

b. Fixed or controlled salary/wages
c. Employer can retrench or terminate employees with reasonable basis
d. Employer can control the employee on how he/she renders work.

okay so we have three types of employees according to their function when we talk about
compensation income:

1. managerial employees - those whose given powers or prerogatives to lay dowwn and
execute managerial policies and/or hire, transfer, suspends, lay-off, recall, discharge, assign
or discipline employees
2. Supervisory employees - those whose effectively recommend such managerial action. If the
exercise of such authority is not merely routinary or clerical in nature but requires the use
of independent judgement.
3. Rank and file employees - those who hold neither managerial nor supervisory function.

so basically, these managerial and supervisory employees are those tops on the business and we also
have those rank-and-file employees or those who neither hold a managerial and supervisory functions
it's basically the or those junior officers’ junior employees of a certain business.

so, we also have two types of employees as to their taxability

1. minimum wage earners - employees who are recipients of minimum wage. They are exempt
from income tax on their compensation. statutory threshold for minimum wage earners so
basically, we have those original rates for this and we can always access them through the
internet so if you want to check about this you can just google minimum wage earners okay so
when you see minimum wage earners, they are exempt income tax and their compensation.
2. Regular employees - employees who are subject to the regular progressive income tax. And then
the other one is the regular employees or those employees who are subject to the regular
progressive income tax.

so, when we talk about compensation income there are also those nontaxable compensation
income that are not going to be a part of your gross compensation intro so the last time, we've
discussed about exclusions of gross income actually we've already discussed about this you are
mandatory contributions such as gsis sss pag-big Phil health and union juice and those exempt
benefits under the NIRC so basically, we've already discussed these two and you can always find
them on the exclusions of gross income video. we also have those benefits necessary to train
business or conduct of profession of the employer and benefits for the convenience or advantage of
the employer so later on we will discuss about this necessary and convenience of the employer but
for now we are going back to your exempt benefits under the NIRC so basically, we've discussed
about this so like what I've said a while ago. we've discussed about this when generations receive as
incidence of employment the minimal benefits 13-month pay and other benefits and certain
benefits of minimum wage earners okay so now we've already discussed about your exempt
benefits under the NIRC particularly for the minimal benefits and 13-month pay and other benefits.
however, I'm going to discuss it briefly again since I've made this info graph
Exclusion of Gross Income

Exclusions – These are those exempted, excluded and non-taxable part of gross income

Non-taxable – not subjected to irregular income tax

Inclusions – source of your gross income and therefore they are taxable and subjected to regular income
tax

Income taxation Scheme

Final Income Tax – Certain Passive Income

Capital Gains Tax – Capital gain on the sale of real property and domestic stocks sold directly to the
buyer

Regular Income Tax – Catch Basin

- Is that the taxable persons are your individuals and also your corporations

Exclusions of Gross Income

a. Proceeds of a Life Insurance Policy

- The proceeds of life insurance policies paid to the heirs or beneficiaries upon the
death of the insured, whether in a single sum or otherwise.
- But if such amounts are held by the insurer under an agreement to pay interest,
the interest payments shall be included in gross income.

b. Amount Received by Insured as Return of Premium

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

a. 100000 - exempted, 100000 – taxable. Return of capital or premiums are exempted while return
on capital gain from life insurance.
b. 200000 – all to husband

c. Gifts, Requests, and devices

- The value of property acquired by 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
transfers of divided interest, shall be included in gross income

a. Gifts (donation during the lifetime of both the donor and donee): Donor’s tax

b. Bequest (gifts of personal property upon the death of the donor) estate tax

c. Devices (gifts of real property upon the death of the donor) estate tax
d. Compensation for Injuries or sickness

- Amounts 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.

- The phrase “personal injury or sickness” does not only include awards for sickness and physical
injury, but also non-physical injury such as personal embarrassment, injury to personal
reputation in the community, mental pain and suffering, fright, serious anxiety, wounded
feelings, moral shock, defamation, slander, breach of promise to marry or libel.

e. Income exempts under Treaty

- Income of any kind, to the extent required by any treaty obligation binding upon the
government of the Philippines. They are excluded by international agreement to which the
Philippine government is a signatory are excluded from income tax.

13th month pay and other de minimis benefits

Train Law – 90,000