BAM 1: Income Taxation for BA

Teachers’ Guide Module #12

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Lesson title: Introduction to Regular Income Tax Materials:

Lesson Objectives: Text book:
At the end of this module, I should be able to: Income Taxation by Rex
1. Summarize the scope of Regular Income Tax and its Banggawan
model; and
2. Discuss the scope and classifications of Gross Income. References:
www.bir.gov.ph/

A. LESSON PREVIEW/REVIEW

Review (5 mins)
In your own words, discuss the taxability of gains in dealings of the following properties:

1. Ordinary Asset

2. Movable / Personal - Capital Asset

3. Immovable / Real – Capital Asset

Activity 1- What I know Chart (3 mins)

Try answering the questions below by writing your ideas under the first column What I Know. It’s
okay if you write key words or phrases that you think are related to the questions.

What I Know Questions: What I Learned

1. What are the coverage of
Regular Income Tax?

This document is the property of PHINMA EDUCATION

 BAM 1: Income Taxation for BA
Teachers’ Guide Module #12

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

2. What are the different

classifications of Gross Income

B. MAIN LESSON

Activity 2 – Content Notes

LO 1: Summarize the scope of Regular Income Tax and its model

CHARACTERISTICS OF REGULAR INCOME TAX

1. General 4. Creditable Withholding Tax
2. Net Income Tax 5. Progressive or Proportional
3. Annual Tax

General
The regular income tax applies to all items of income except those that are subject to final tax.
Capital gains tax, and special tax regimes.

Net Income Taxation

The regular tax is an imposition on residual profits or gains after deductions for expenses and
personal exemptions allowable by law.

Annual Income Tax

The regular income tax applies on yearly profits or gains. The gross income and expenses of the
taxpayer are measured using the accounting methods adopted by the taxpayer and are reported
to the government over the accounting period selected by the taxpayer.

Creditable Withholding Tax

Most items of regular income are subject to creditable withholding tax (CWT).

Progressive or Proportional Tax

The NIRC imposes a progressive tax on the taxable income of individuals while it imposes a flat or

This document is the property of PHINMA EDUCATION

 BAM 1: Income Taxation for BA
Teachers’ Guide Module #12

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

proportional tax of 30% upon the taxable income of corporations

This document is the property of PHINMA EDUCATION

 BAM 1: Income Taxation for BA
Teachers’ Guide Module #12

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

Regular Income Tax Table for Individuals

REGULAR INCOME TAX MODEL

Gross Income xx
Less: Allowable Deductions xx
Taxable Income xx

LO 1: Discuss the scope and classifications of Gross Income.

GROSS INCOME – All income from whatever sources.

Gross Income, for purposes of computing RIT, is all income from whatever sources (1) not subject to Final
Tax; (2) not subject to CGT; and (3) not exempt (Exclusion of Gross Income).

Classification of Gross Income

1. Compensation Income – Employee-Employer relationship
2. Business or Professional Income – Selling of goods or services
3. Other Taxable Income – Neither Compensation nor Business or Professional Income.
Employees

Source(s) of Income Payment of Tax Income Tax Return

1. Purely Compensation Income Substituted Filing No need to file an ITR
personally

This document is the property of PHINMA EDUCATION

 BAM 1: Income Taxation for BA
Teachers’ Guide Module #12

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

2. W/ Other Taxable Income Need to file an ITR – Annual – BIR Form 1700
Consolidated Income
3. w/ Business or Professional Need to file an ITR – Quarterly and Annual – 1701
Income Consolidated Income

Note: Substituted Filing may only be availed by Pure compensation Income earners. The latter may relieve from
the obligation to file an annual ITR. Provided further that the latter has: (1) no other taxable Income; (2) no
other employer; and (3) Income Tax Withheld was correct.

Business or Professional Income

Source(s) of Income
1. Pure Business or
Professional Income
2. Mixed Income Earners
Payment of Tax
ITR Quarterly & Annually
ITR Quarterly & Annually
Income Tax Return
BIR Form 1701A – May use
8% Optional Income Tax or
Regular Income Tax.
BIR Form 1701

Note: The 8% Income Tax shall be in lieu of (1) Progressive Tax; and (2) 3% Progressive Tax.

Activity 3: Skill-building Activities

Let’s practice! After completing each exercise, you may refer to the Key to Corrections for feedback. Try to
complete each exercise before looking at the feedback.

Exercise 1 : True or False

__________1. There are two types of regular income tax: proportional income tax for corporations and
progressive income tax for individuals.
__________2. NRA-NETB and NRFCs are also subject to regular income tax.
__________3. All taxpayers are subject to final tax.
__________4. Taxable income is synonymous to net income.
__________5. For all taxpayers, taxable income means the pertinent items of gross income not subject to
capital gains tax and final tax less allowable deductions.
__________6. All taxpayers are subject to regular income tax.

This document is the property of PHINMA EDUCATION

 BAM 1: Income Taxation for BA
Teachers’ Guide Module #12

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

__________7. Employed taxpayers can claim expenses from their employment as deductions against their
compensation income.
__________8. Items of gross income subject to final tax and capital gains tax are excluded in gross income
subject to regular income tax.
__________9. The P250,000 income tax exemption for individuals is designed to be in lieu of their personal
and business expenses.
__________10. Non-taxable compensation are items of compensation that are excluded against gross
income.

ACTIVITY 4: What I know Chart – Part 2 (3 mins)

It’s time to answer the “what I learned” column in the What I Know chart in Activity 1.

ACTIVITY 5: ‘Check for understanding

Exercise 1: In your own words, enumerate and discuss the different characteristics of Regular Income
Tax.

________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________________

Exercise 2: Problem Solving – Provide your solutions.

1. ABC earned a compensation income of P120,000 and a net income from business of P300,000. He also
earned P8,000 prizes from a dancing competition and P45,000 royalties from his musical composition.
ABC has P200,000 personal expenses. Compute the taxable income.

2. In 2020, CDE earned P450,000 compensation income but incurred P120,000 net loss in his business.
What is his taxable income assuming she incurred personal expenses of P100,000?

This document is the property of PHINMA EDUCATION

 BAM 1: Income Taxation for BA
Teachers’ Guide Module #12

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

3. FGH, had the following data in 2020:

Compute the taxable income and the tax due if FGH is a resident citizen.

4. In the immediately preceding problem, compute the taxable income and the tax due if FGH is a NRA-
ETB.

C. LESSON WRAP-UP

You’ve finish another module, Congratulations! Shade the number of the module that you finished to track your
accomplishment.

Did you have challenges learning the concepts in this module? If none, which parts of the module helped you
learn the concepts?
____________________________________________________________________________________________________________________
____________________________________________________________________________________________

Some question/s I want to ask my teacher about this module is/are:

____________________________________________________________________________________________________________________
____________________________________________________________________________________________

Key to Corrections:

This document is the property of PHINMA EDUCATION

 BAM 1: Income Taxation for BA
Teachers’ Guide Module #12

Name: _________________________________________________________________ Class number: _______

Section: ____________ Schedule: ________________________________________ Date: ________________

True or False
1. True
2. False
3. False
4. False
5. True
6. True
7. False
8. True
9. False
10. True

Problem Solving
1. P 465,000
2. P 450,000
3. P 4,480,000; P 1,283, 600
4. P 2,000,000; P 490,000

This document is the property of PHINMA EDUCATION