Regular Income Tax:

EXCLUSION FROM GROSS

INCOME
EXCLUSION FROM 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;
b) Amount received by the insured as a return of premium –
The amount received by the insured as a return of premiums paid
by him under the life insurance, endowment, or annuity contracts,
either during the term at the maturity of the term mentioned in the
contract or upon surrender of the contract.
EXAMPLE:
Alberto is insured in a P1,000,000 life insurance policy with
annual premium payments of P20,000 for 10 years. If Alberto
outlives the policy after the 10th year, he will be paid a
P500,000 maturity value.
EXCLUSION FROM GROSS INCOME
c) Gifts, Bequests, and Devises or Descent – 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.
EXAMPLE:
Mark received a restaurant business a gift on April 1, 2018. On
that date, the restaurant had total properties amounting to
P400,000 including P50,000 cash income earned since January
1, 2010. The restaurant posted an additional P150,000 cash
income from April 1 to December 31, 2018.
EXCLUSION FROM GROSS INCOME
d) Compensation for injuries and sickness – Amounts received
through accident or health insurance or under Workmen’s
Compensation Acts as compensation fro personal injuries or sickness,
plus the amounts of any damages received, whether by suit or
agreement, on account of such injuries or sickness.
EXAMPLE:
Andrew was hit by a jeepney. He spent 3 months in the
hospital and paid P100,000 for hospitalization expenses. He
sued the jeepney driver and was awarded by the court a total
indemnity of P340,000 divided as follows: P200,000 indemnity
for his pain, anguish and sufferings, P40,000 for his lost
salaries, and P100,000 as reimbursement for his hospital bills
EXCLUSION FROM GROSS INCOME
e) Income exempt under treaty – Income items that are included
by international agreement to which the Philippine government is a
signatory are excluded from income tax. It must be recalled that
treaty agreements override provisions of out revenue tax laws in
case of conflict under the exemption doctrine of international
comity.
EXCLUSION FROM GROSS INCOME
f) Retirement Benefits, Pensions, Gratuities and other benefits
1) Retirement benefit under RA. 7641 and those received by officials
and employees of private firms in accordance with a reasonable private
benefit plan maintained by the employer.
Requisites:
a. The employer maintains a reasonable private benefit plan.
b. The retiring official or employee has been in the services of the same employer
for at least 10 years.
c. The retiring employee is at least 50 years of age at the time of retirement.
d. This is the first time availment of retirement benefit exemption.
EXAMPLE:
1) Angel was employed in 1998 when she was 25 years old. In 2018, she
availed of the early retirement program of her employer.

2) Assume that Angel joined another employer and worked therein for 7
more years after which she retired from her employment.

3) Assume instead that Angel was 30 years old when she joined her first
employer and worked therein for 20 years after which she retired at
50. she immediately joined another employer and retired after 10
years of service when she was 60 years old.
EXCLUSION FROM GROSS INCOME
f) Retirement Benefits, Pensions, Gratuities and other benefits
2) Separation or Termination
Requisite:
a) The separation or termination must be due to job-threatening
sickness, deaths, or other physical disability; and
b) The same must be due to any cause beyond the control of the
employee or official such as:
-Redundancy, Retrenchment, Closure, Employee lay-off, Downsizing,
and Sickness or death of employee
EXCLUSION FROM GROSS INCOME
f) Retirement Benefits, Pensions, Gratuities and other
benefits
3) Social Security Benefits, Retirement Gratuities, and other similar
benefits from foreign government agencies nad other institutions,
private or public
4) United States Veteran Association
5) Social Security System benefits
6) GSIS benefits
EXCLUSION FROM GROSS INCOME
f) Miscellaneous items
1) Income derived on investments in the Philippines in loans, stocks,
bonds, or other domestic securities, or from interest on deposits in
banks in the Philippines.
2) Income derived by the government and its political subdivisions
3) Prizes and Awards made primarily in recognition of religious,
charitable, scientific, educational, artistic, literary, or civic
achievements
EXCLUSION FROM GROSS INCOME
g) Miscellaneous items
4) Prizes and Awards in Sports Competitions granted to athletes
5) Contributions for GSIS, SSS, Phil Health, Pag-Ibig and Union dues of the
Individuals
6) 13th month pay and other benefits received by officials and employees of
public and private entities not exceeding P90,000
7) Gains from sale of bonds, debentures, or other certificate of
indebtedness with a maturity of more than 5 years
8) Gains realized from redemption of shares in a mutual fund company by
the investor.