GROSS INCOME
INCOME
Gain derived from labor, or capital,
or both labor and capital, and
includes the gain derived from the
sale or exchange of capital assets.
GROSS INCOME
Total income of a TP subject to
tax.
Gains, profits, and income derived
from any source, whether legal or
illegal.
INCLUSIONS
Gains, profits and income derived from:
1. Compensation for services, including fees,
salaries, wages, commissions and similar
items;
2. Annuities and pensions;
3. Gains derived from dealings in property,
whether real or personal;
4. Winnings, cinematographic films and similar
works, prizes, royalties, interests, dividends
and partner’s distributive share in NI of the
partnership;
5. GI derived from the conduct of trade,
business or exercise of profession;
6. Rents;
7. Transaction of any business carried on for
gain or profit; and
8. Income of whatever kind and in whatever
form derived from any source.
EXCLUSIONS
1. Proceeds of life insurance policies paid to
beneficiaries upon the death of the insured.
2. Amount received by the insured as a return of
premiums paid by him under life insurance,
endowment or annuity contracts.
3. Gift, bequest, devise or descent.
4. Compensation for personal injuries/sickness
received thru accident/health insurance or
Workmen’s Compensation Act, plus DAMAGES
received on account of such injuries/sickness.
EXCLUSIONS
5. Income exempt under any treaty binding upon
the government of the PH.
6. Retirement benefits, pension, gratuities, etc.
a. received by officials & employees of private
firms, whether individual or corporate
Requisites:
1. There must be a reasonable private benefit
plan maintained by the employer.
2. The retiring official/employee has been in the
service of the same employer for at least 10 yrs.
EXCLUSIONS
3. Not less than 50 years of age at the time of
retirement.
4. The benefit of exemption may be availed of
only once.
b. Separation pay received by an official/employee/
his heirs from the employer due to:
Death, sickness, physical disability, and any cause
beyond the control of the official or employee.
EXCLUSIONS
c. Retirement benefits, pensions, and similar
benefits received from foreign government
agencies & other institutions, public or private.
d. Benefits received from U.S Veterans
Administration.
e. Benefits received from SSS
f. Benefits received from GSIS
g. Benefits received by government officials &
employees.
EXCLUSIONS
7. Income of the PH government/political subdivisions
derived from:
a. Any public utility, and
b.The exercise of any essential government function.
8. Income of
a. Foreign government
b. Financing institutions owned by them
c. International/regional financing institutions
established by them from their investments in the PH in
loans, stocks and bonds, or from interest on bank
deposits in the PH.
EXCLUSIONS
9. Prizes and awards in recognition of religious,
charitable, scientific, educational, artistic, literary, or civic
achievement.
Requisites:
a. Recipient was selected w/o entering any contest or
proceedings.
b. Recipient is not required to render substantial future
services.
10. Prizes and awards in sports competition.
EXCLUSIONS
11. 13th month pay & other benefits not exceeding 90,000
(TRAIN LAW)
12.“De minimis” benefits, such as:
a. Monetized unused vacation leave credits of private
employees not exceeding 10 days during the year;
b. Monetized value of vacation and sick leave credits paid
to government official and employees;
c. Medical cash allowance to dependents of employees
not exceeding 1,500 per employee per semester, or
250 per month.
EXCLUSIONS
d. Rice subsidy of 2,000 or 1 sack of 50-kg rice per month
e. Uniforms and clothing allowance not exceeding 6,000
per annum
f. Actual medical assistance, e.g. medical allowance to
cover medical and healthcare needs, annual
medical/executive checkup, maternity assistance, and
routine consultations, not exceeding 10,000 per annum
g. Laundry allowance not exceeding 300 per month
EXCLUSIONS
h. Employee achievement awards
*length of service
*safety achievement
!! Must be in the form of tangible personal property
other than cash/GC, w/ an annual monetary value not
exceeding 10,000
*received by the employee under an established written
plan which does not discriminate in favor of highly paid
employees
EXCLUSIONS
i. Gifts given during Christmas and major anniversary
celebrations not exceeding 5,000 per employee per
annum
j. Daily meal allowance for overtime work and night or
graveyard shift not exceeding 25% of the basic
minimum wage on a per region basis
j. Benefits received by an employee by virtue of a CBA &
productivity incentive schemes not exceeding 10,000
per employee per taxable year.
EXCLUSIONS
13. GSIS, SSS, Philhealth and Pag-ibig contributions and
union dues of individuals
14. Gains from sale of bonds, debentures, or other
certificates of indebtedness with maturity of more than 5
years
15. Gains from redemption of shares in mutual fund
PRACTICE PROBLEMS
1. Which of the following is not an income?
a. Gain from labor
b. Gain from capital
c. Return of capital
d. Gain derived from a sale of asset
PRACTICE PROBLEMS
2. Hershe bought a residential house and lot in 2015 for
120,000. In 2018, curious as to how much her property
then cost, she asked a real estate broker to reappraise
the same. The real estate broker reported that the value
of her property has increased to 500,000. Hershe should
report GI in her ITR for the year 2018 of:
a. 500,000
b. 120,000
c. 380,000
d. None
PRACTICE PROBLEMS
3.A tax exclusion is defined as
a. An item or amount which the law allows to be
deducted from GI in order to arrive at net income.
b. The grant of immunity to particular persons or
corporations from a tax which others within the same
taxing district are obliged to pay.
c. Income received but which is not taxable as it is
exempted by law or by treaty.
d. A deduction from income tax due of any amount paid
to a foreign country subject to limitation.
PRACTICE PROBLEMS
4. Proceeds of insurance taken by a corporation on the
life of an executive to indemnify it against loss in case of
his death is:
a. Exempt from income tax
b. Part of taxable income
c. Subject to final tax
d. partly exempt, partly taxable
PRACTICE PROBLEMS
5. Amount receivable by the estate of the deceased, his
executor or administrator as a beneficiary under policy
taken by the decedent upon his own life is:
a. Excluded from GI
b. Part of GI whether the beneficiary is revocable or
irrevocable
c. Part of GI if the beneficiary is revocable
d. Part of GI if the beneficiary is irrevocable
PRACTICE PROBLEMS
6. Kapuso insured his life with an insurance company.
Under the contract, he will pay a monthly premium of
2,000 for 10 years. In case of death before the 10th year,
his beneficiary will receive an indemnification in the
amount of 150,000. if he is still living on the 10th year, he
will receive 500,000. If Kapuso dies on the 5th year, his
beneficiary will report an income of:
a. 500,000
b. 150,000
c. 260,000
d. Exempt
PRACTICE PROBLEMS
7. If Kapuso dies on the 5th year, and his beneficiary was
offered to received the 150,000 in cash or to receive it in
installment of 20,000 for 10 monthly installment
payments and the beneficiary chose the 2nd option, he
will report an income of:
a. 500,000
b. 150,000
c. 50,000
d. Exempt
PRACTICE PROBLEMS
8. If Kapuso survives the policy and is able to receive the
500,000, he will report an income of:
a. 500,000
b. 260,000
c. 150,000
d. None
PRACTICE PROBLEMS
9. Malaya was insured under an endowment policy with a
value of 500,000. total premiums paid by him during the
term of premium payments on the policy was 490,000,
from which there was a return of premiums of 40,000. at
the maturity of the policy, Malaya received 500,000. the
income of Malaya under the policy is:
a. 0
b. 500,000
c. 10,000
d. 50,000
PRACTICE PROBLEMS
10.Which of the following is taxable?
a. Agricultural land inherited
b. Cash received as gift
c. Philippine Charity Sweepstakes winnings of 10,000
d. Interest on government bonds
PRACTICE PROBLEMS
11.Which of the following is taxable?
a. Separation pay received by a 50-year old employee due to
the retrenchment program of the employer.
b. Retirement pay received from a benefit plan registered
with the BIR where at the time the employee retired, he
was 55 years of age, retiring from employment for the
first time in his life, and was employed with the employer
from whom retiring for 6 years prior to retetirement.
c. SSS and GSIS benefit
d. Social security benefit received by a balikbayan from
employer abroad at the age of 35.
COMPENSATION PAID
IN PROMISSORY
NOTES
Constitute income to the extent of FMV
at the time of receipt. FMV is the fair
discounted value.
PRACTICE PROBLEMS
When services are paid for in non-interest bearing note,TP:
a. Shall not report any income from the promissory note
b. Shall defer reporting of the income until the note is paid
upon maturity
c. Shall report as income the face value of the note plus
interest at legal rate
d. Shall report as income the FMV of the promissory note
at the time of receipt
PRACTICE PROBLEMS
If a corporation transfers to its employees its own stock as
remuneration for services rendered by the employee, the
amount of such remuneration is the:
a. FMV of the stock at the time they were given to
employees
b. FMV of the stock at the time they were sold by the
employee
c. PV of the stock
d. FMV of the stock at the time the services were rendered.
PRACTICE PROBLEMS
On March 31, 2019, Plinky received 100 shares of stock with
a FMV of 120 per share as of March 31, 2019. the shares of
stock were intended to pay the services rendered by Plinky
on November 20, 2018, at which the FMV was 100 per share.
The par value per share is 50.The income of Plinky is:
a. 12,000
b. 10,000
c. 5,000
d. 2,500
PRACTICE PROBLEMS
Which of the following items that reduce salaries of
employees is not an exclusion from GI?
a. GSIS or SSS Contributions
b. Philhealth and Pag-ibig Contributions
c. Labor union dues
d. IOU’s
PRACTICE PROBLEMS
13th month pay – 45,000
Christmas bonus – 25,000
Productivity incentive pay – 20,000
The gross compensation income subject to tax is:
a. 90,000
b. 60,000
c. 8,000
d. 1,000
PRACTICE PROBLEMS
13th month pay – 45,000
Christmas bonus – 25,000
Productivity incentive pay – 20,000
The gross compensation income subject to tax is:
a. 90,000
b. 60,000
c. 8,000
d. 1,000
PRACTICE PROBLEMS
13th month pay – 45,000
Christmas bonus – 25,000
Productivity incentive pay – 20,000
The gross compensation income subject to tax is:
a. 90,000
b. 60,000
c. 8,000
d. 1,000
PRACTICE PROBLEMS
Merced, a resident citizen of the Philippines, married an employee of SMC
Corp., had the following data for 2015:
Salary net of 15,000 exclusions for SSS, Philhealth and Pag-ibig, etc. – 260,000
13th month pay – 55,000
Loyalty award – 40,000
Productivity incentives pay – 40,000
De minimis benefit (within maximum) – 10,000
How much income tax was withheld on the compensation income?
A. 11,000
B. 56,900
C. 51,500
D. 68,900
PRACTICE PROBLEMS
Marfil, has the following income in 2018:
Salary as audit supervisor – 180,000
Income from accounting practice – 100,000
Per diem as director – 120,000
Accumulated vacation pay (9 days) – 20,000
13th month pay and other benefits – 106,000
Winnings from PCSO – 10,000
How much compensation income is subject to basic tax?
a. 486,000 c. 316,000
b. 386,000 d. 336,000
