Gross Income

 all income from whatever source, unless exempt from tax

Inclusions from Gross Income

1. Compensation for services in whatever form paid.

2. Gross income derived from the conduct of trade or business, or the exercise of a profession.

3. Gains derived from dealings in property.

4. Interest

5. Rents

6. Royalties

7. Dividends

8. Annuities

9. Prizes and winnings

10. Pensions

11. Partner’s distributive share from the net income of general professional partnership.

Compensation Income

 employer-employee relationship
 salaries and wages, emoluments, honoraria, taxable bonuses, allowances (such as
transportation, representation and entertainment), fringe benefits, fees, taxable pensions and
retirement pay, commission

Business Income

 conduct of trade or business

Gains Derived from Dealings in Property

 derived from the disposition of property

 gain or loss

Interest Income

 interests are taxable income, unless exempt

 such interest as arising from indebtedness, that is, compensation for the loan
 Interest income on deposits in bank = PASSIVE INCOME = 20% final withholding tax.

Rent Income

• paid by the lessee for the use or lease of property

• Rent is the amount paid for the use or enjoyment of a thing (real or personal) or right.
Royalty Income

 paid to the owner of a right, such as an oil right or a patent for the use of it

Dividend Income

 derived from the distribution

Annuity Income

 specified income payable at stated intervals for a fixed period, often for the recipient’s life, in
consideration of a stipulated premium paid
 Return of capital, not taxable. Return on capital, taxable.

Prizes & Winnings

• A PRIZE is an award to be given to recognize and reward actions or achievements.

• WINNINGS - by virtue of chance or bets.

Other Sources of Income

1. Bad debt recovery

2. Tax refund or credit

3. Income from whatever source

Income from Illegal Sources

a. Gambling

b. Kidnapping

c. Extortion

d. Smuggling

e. Embezzlement; and

f. Income received by error

Exclusions from Gross Income

 Not included in determination of taxable income

1. Proceeds of life insurance

2. Amount received by the insured as a return of capital

3. Gifts, bequests, and devices

4. Compensation for injuries or sickness

5. Income exempt under treaty

 6. Retirement benefits, pensions, gratuities, etc.

7. Compensation income of minimum wage earners

8. Compensation income of OFWs

9. Compensation income of senior citizen not exceeding P60,000 during the taxable year

10. Incomes and gains subject to final tax

11. Miscellaneous items:

a. income of foreign government

b. prizes and awards

c. 13th month pay and other benefits not to exceed P90,000.

d. GSIS, SSS, Pag-Ibig, and Philhealth contributions, and union dues

e. gains from sale of bonds debentures, and other certificates of indebtedness with maturity of
more than 5 years.

f. gains from redemption of shares in mutual funds.

g. de minimis benefits under the prescribed ceilings.

De Minimis Benefits

1. PRIVATE EMPLOYEES – unused vacation and leave not exceeding 10 days fpr a year

2. GOVERNMENT – unused vacation and sick leave

3. Medical cash allowance = not exceeding P1,500 per employee per semester, or P250 per month.

4. Rice subsidy, P2,000 or 1 sack of 50 kg. rice per month to not more than P2,000.

5. Uniform and clothing allowance = not exceeding P6,000 per annum.

6. Actual medical allowance = not exceeding P10,000 per annum.

7. Laundry allowance = not exceeding P300 per month.

8. Employee achievement award (tangible property), with an annual monetary value not exceeding
P10,000

9. Gifts = not exceeding P5,000 per annum.

10. Daily meal allowance for overtime work and night or graveyard shift = not exceeding 25% of the
basic minimum wage in a per region basis.

11. Benefits received by an employee by virtue of CBA = (total annual monetary value of CBA and
productivity incentive) do not exceed P10,000 per employee per taxable year.
 Treatment of taxable de minimis benefits

1. For rank and file employees = treated as other compensation income under the category 13 th

2. For managerial and supervisory employees, = final fringe benefit tax. And based on GMV

3. The grossed-up monetary value = MV/65%

4. The rate of 35% of the grossed-up monetary value.

5. The grossed-up monetary value = income of employee

6. The fringe benefit income tax is a FINAL TAX on gross taxable income.

Fringe Benefits

• Fringe benefit refers to any good, service, or other benefit furnished or granted by an employer

a. housing

b. vehicle of any kind.

c. expense account

d. household personnel, such as maid, driver and others.

e. interest on loan at less than market rate.

f. membership fees

g. expenses for foreign travel

h. holiday and vacation expenses

i. educational assistance, to the employee or his dependents.

j. life or health insurance and other non-life insurance premiums.

HOUSING
MOTOR VEHICLE

EDUCATIONAL ASSISTANCE