Individuals Earning Purely Compensation Income

CASE I. Mr. Ihong, a minimum wage earner works for G.O.D., Inc. He is not engaged in business nor
earned a total compensation income of P135,000.00 with non taxable benefits of P15,000.00.

How much is the tax liability of Mr. Ihong?

Total Compensation Income P 135,000.00

Less: Non-Taxable benefits 15,000.00

Taxable Income 120,000.00

Tax Due -

CASE II. Mr. Macly, who also works for G.O.D., Inc. He is not engaged in business nor
earned a total compensation income of P278,000.00 with non taxable benefits of P16,000.00.

How much is the tax payable of Mr. Macly?

Total Compensation Income P 278,000.00

Less: Non-Taxable benefits 16,000.00

Taxable Income 262,000.00

Tax Due 2,400.00

Self-Employed Individuals Earning Income Purely from

Self-Employment or practice of Profession

CASE 1. Ms. Samson operates a convenience store while she offers bookkeeping services to her clients.
In 2018, her gross sales amounted to P800,000.00, in addition to her receipts from bookkeeping
services of P300,000.00. She already signified her intention to be taxed at 8% gross income tax rate
in her 1st quarter return.

How much is her tax liability?

Gross Sales - Convenience Store P 800,000.00

Gross Receipts - Bookkeeping 300,000.00
Total Sales/Receipts 1,100,000.00
Less: Amount allowed as Deduction 250,000.00
Taxable Income 850,000.00

Tax Due 68,000.00

CASE II. Ms. Datu-Pution, failed to signify her intention to be taxed at 8% fross income tax rate on her
initial Quartely Income Tax Return, her gross income is P1,100,000.00 and she incured cost of sales and
operating expenses amounting P600,000.00 and P200,000.00. respectively or a total of P800,000.00

How much is her tax liability?

Gross Sales/Receipts P 1,100,000.00

Less: Cost of Sales 600,000.00
Gross Income 500,000.00
Less: Operating Expenses 200,000.00
Taxable Income 300,000.00

Tax Due 10,000.00

CASE III. Ms. Ganda, opted to be taxed using the Graduated Rates under the Optional Standard Deduction on her
initial Quartely Income Tax Return, her Gross Receipts is P1,300,000.00 and she incured cost of sales and
operating expenses amounting P700,000.00 and P250,000.00. respectively or a total of P950,000.00

How much is her tax liability?

Gross Sales/Receipts 1,300,000.00

Less: Optional Standard Deduction 520,000.00
Taxable Income 780,000.00

Tax Due 125,000.00

Individual Earning Income Both from Compensation and from Self-employment
(business or practice of profession)

CASE I. Mr. MAG, a Financial Comptroller of JAB Company, earned annual compensation in 2018 of P1,500,000.00
with non taxable benefits of P60,000. Aside from employment income, he owns a convenience store , with
gross sales of P2,400,000. His cost of sales and operating expenses are P1,000,000.00 and P600,000.00.
Mr. MAG opted for 8% Gross Income Tax.

How much is the tax liability of Mr. Mag?

On Compensation:
Total Compensation Income P 1,500,000.00
Less: Non-Taxable benefits 60,000.00
Taxable Income 1,440,000.00

Tax Due on Compensation Income 322,000.00

On Business Income:
Gross Sales 2,400,000.00
Less: Amount allowed as Deduction - (250,000 allowed deduction
Taxable Income 2,400,000.00 not available for mixed income
earners under 8% GIT)
Tax Due 192,000.00

Total Income Tax Due (Compensation and Business) 514,000.00

Case II. Compute the tax of Mr. MAG using Graduatued Tax Rates under Optional Standard Deduction Method

Total Compensation Income P 1,500,000.00

Less: Non Taxable Benefit 60,000.00
Total Compensation Income 1,440,000.00
Add: Taxable Income from Business
Gross Sales/Receipts 2,400,000.00
Less: Optional Standard Deduction 960,000.00
Taxable Income from business 1,440,000.00

Total Taxable Income (Compensation and Business) 2,880,000.00

Tax Due 771,600.00

Case III. Compute the tax of Mr. MAG using Graduatued Tax Rates under Itemized Deduction Method

Total Compensation Income P 1,500,000.00

Less: Non Taxable Benefit 60,000.00
Total Compensation Income 1,440,000.00
Add: Taxable Income from Business
Gross Sales/Receipts 2,400,000.00
Less: Cost of Sales 1,000,000.00
Gross Income 1,400,000.00
Less: Operating Expenses 600,000.00
Taxable Income 800,000.00

Total Taxable Income (Compensation and Business) 2,240,000.00

Tax Due 566,800.00