FUNDAMENTALS OF

ACCOUNTANCY BUSINESS &

MANAGEMENT
(FAB2)
SHAI ROSE Q. ODARVE
What is the
primary
purpose of
taxation?
Its purpose is to provide funds or
property with which the
government discharges its
appropriate functions for the
protection and general welfare of
the citizens.
 What do you think
are income subject to
tax?
GROSS INCOME
FROM
COMPENSATION
 OBJECTIVES:
AT THE END OF THE LESSON, STUDENTS ARE
EXPECTED TO:

• Prepare the list of sources of

gross income from compensation,
non-taxable income and its
allowable deduction.
Gross Compensation income is
defined as taxable income arising
from an employer/employee
relationship.
 COMPENSATION INCOME
INCLUDES THE FOLLOWING
• Salaries, wages, compensation, commissions, emoluments and honoraria
• Bonuses exceeding P 90,000.00
• Allowances for transportation, representation, entertainment, and other
similar items,
• Fees (including director’s fees paid to a director who is at the same time
an employee of the payer)
• Taxable Pensions
• Taxable retirement pay
• Other income of similar nature
 TAX EXEMPT INCOME
INCLUDES THE FOLLOWING
• Proceeds of Life insurance policies
• Amount received by insured as return of premium
• Gifts, bequests, and devises
• Compensation for injuries or sickness
• Income exempt under treaty
• Retirement, benefits, pensions and gratuities and etc.
 HOW TO COMPUTE
COMPENSATION INCOME?

Total compensation Income xxx

Less: Non-taxable 13th month pay
and other benefits xxx
Taxable Compensation Income xxx
 NEW TRAIN TAX TABLE
(FOR THE YEARS 2018-2022)
Hawod Sia generated annual compensation income
(including the 13th month pay) of P815,000.
Statutory payments are as follows: SSS – P 5,975.60;
Philhealth - P 3,250; Pag-ibig Contribution – P 2,200.
Tax exempt 13th month pay and other bonuses – P
50,000
 SOLUTION:

Gross Compensation (salary and bonuses) 815,000.00

Less: Statutory contributions ( 11,425.60)
Less: Tax exempt 13th month bonus ( 50,000.00)
Taxable Compensation Income 753,574.40
Tax Due:
753,574.40
400,000.00 30,000.00
353,574.40
x 25% 88,393.60
Tax Due 118,393.60
 GROUP ACTIVITY

• #showmewhatyou’vegot
Instruction: Each group will be given a
situation/problem and will compute for the taxable
income and corresponding tax due of an
individual. Afterwards, they will choose a
representative to present their output.
GROUP 1

• Juan Dela Cruz generated annual compensation

income (including the 13th month pay) of P615,000.
Statutory payments are as follows: SSS – P 6,975.60;
Philhealth - P 5,250; Pag-ibig Contribution – P 1,200.
Total: P 13,425.60 Tax exempt 13th month pay and
other bonuses – P 60,000
 SOLUTION:

Gross Compensation (salary and bonuses) 615,000.00

Less: Statutory contributions ( 13,425.60)
Less: Tax exempt 13th month bonus ( 60,000.00)
Taxable Compensation Income 541,574.40
Tax Due:
541,574.40
400,000.00 30,000.00
141,574.40
x 25% 35,393.60
Tax Due 65,393.60
GROUP 2

Anthon Nalibog generated annual compensation

income of P965,000 (excluding the 13th month pay).
Statutory payments are as follows: SSS – P 6,975.60;
Philhealth - P 5,250; Pag-ibig Contribution – P 1,200.
Total: P 13,425.60 ,13th month pay and other
bonuses – P 100,000
 SOLUTION:

Gross Compensation (including 13th month pay) 1,065,000.00

Less: Statutory contributions ( 13,425.60)
Less: Tax exempt 13th month bonus ( 90,000.00)
Taxable Compensation Income 961,574.40
Tax Due:
961,574.40
800,000.00 130,000.00
161,574.40
x 30% 48,472.32
Tax Due 178,472.32
GROUP 3

• Luiz Nasayunan generated a monthly compensation

income of P25,000 .Statutory payments are as
follows: SSS – P 6,975.60; Philhealth - P 5,250; Pag-
ibig Contribution – P 1,200. Total: P 13,425.60 ,13th
month pay and other bonuses – P 25,000.00 (year-
end bonus)
 SOLUTION:
Gross Compensation (25,000X 12)+ (13th month pay) 325,000.00
Less: Statutory contributions ( 13,425.60)
Less: Tax exempt 13th month bonus ( 25,000.00)
Taxable Compensation Income 226,574.40
Tax Due:
286,574.40
250,000.00 0.00
36,574.40
x 20% 7,314.88
Tax Due 7,314.88
 ANALYSIS
After they present their group output in the class, call a
group representative and ask the following questions.
Group 1: Why is it that the 60,000 was deducted to the
Gross Compensation Income?
Group 2: Why is it that only 90,000 was deducted to the
Gross Compensation income even if the given shows the
amount of 100,000 as 13th month pay?
Group 3: What if the problem states that the monthly
compensation amounted to 20,000 and the statutory
payments are still the same and the year-end bonus
amounting to P20,000? What is your tax due?
 SOLUTION:

Gross Compensation (20,000X 12)+ (13th month pay) 260,000.00

Less: Statutory contributions ( 13,425.60)
Less: Tax exempt 13th month bonus ( 20,000.00)
Taxable Compensation Income 226,574.40
Tax Due:
226,574.40
250,000.00 0.00

Tax Due 0.00

FOOD FOR THOUGHT
EVALUATION:
In ½ sheet of paper, solve for tax due of the ff:
Note: All given are taxable income already. (Show your
solution)
1. 687,385
2. 320,000
3. 489,682
4. 837,450
5. 965,866
• V- ASSIGNMENT/ AGREEMENT

Study gross income from business.