EXCLUSIONS FROM

GROSS INCOME
(13th month pay, De Minimis Benefits, GSIS, SSS, MEDICARE, and other
contribution)
13th month pay and other benefits …
The exclusion from Gross Income of 13th month pay can be found under
Sec. 32, B (e) of the NIRC as amended by RA 10963 or the TRAIN Law
which provides:

“B.. Exclusions from Gross Income – The following items shall not be
included in Gross Income and shall be exempt from taxation under this
title xxx
(e) Gross benefits derived by officials and employees of public and
private entites xxx”
General Rule: “13th month pay is exempt from taxation”

Exception:
- the 13th month pay and other equivalent benefits shall not be subject
to tax for a maximum of P90,000. (Section 32 (B)(7)(e) of the National
Internal Revenue Code (NIRC) –amended by Republic Act No. 10963 or
the TRAIN law)
What does this cover?

1. Benefits received by officials and employees of the national and local government pursuant to
RA 6686 (AN ACT AUTHORIZING ANNUAL CHRISTMAS BONUS TO NATIONAL AND LOCAL
GOVERNMENT OFFICIALS AND EMPLOYEES STARTING CY 1988)
2. Benefits received by employees pursuant to PD 851 (Act which required all employers to pay
13th month pay to employees) as amended by memorandum order no 28 dated August 13,
1986.
3. Benefits received by officials and employees not covered by PD no. 851 as amended by
Memorandum Order no. 28 dated August 13, 1986.
4. Other benefits such as productivity incentives and Christmas bonus.
Illustration:
A worked for XYZ Corp for 11 months. She has a monthly salary of
25,000 pesos. She is entitled to a 13th month pay of 22,916 (11 x 25,000
divided by 12). Since the 13th month pay did not exceed 90,000 pesos,
the said amount shall not be ncluded in the computation of the
employee’s gross income for the applicable taxable year.
De minimis benefits
De Minimis benefits are benefits of relatively small values provided by
the employer to the employee on top of basic compensation intended
for the general welfare of the employees. Being relatively small values,
the same is not considered as taxable compensation and as such not
subject to income tax and withholding tax on compensation.
• List of De mininis benefits both to managerial and rank and file
employees with some items updated in amount by Revenue
Regulations No. 11 – 2018 and the TRAIN Law.
1. Monetized unused vacation leave credits of private employees not exceeding 10 days during
the year.
2. Monetized value of vacation and sick leave credits paid to the government officials and
employees.
3. Medical cash allowance to dependents, no exceeding 1,500 pesos per employee per semester
or 250 pesos per month. (as amended)
4. Rice subsidy of 2,000 pesos or one sack of 50 kgs rice per month amounting to not more that
2,000 pesos (as amended)
5. Uniform and clothing allowance not exceeding 6,000 per annum (as amended)
6. Actual medical assistance, (medical allowance to cover needs, annual medical/executive
checkup, maternity assistance, routine consultations) not exceeding 10,000 pesos per annum.
7. Laundry allowance not exceeding 300 pesos per month.
8. Employment achievements awards (length of service, etc.) which must be in the form of tangible
personal property other than cash or gift cert., with annual monetary value not exceeding 10,000
pesos received by the employee under an established written plan which does not discriminate in
favor of highly paid employees.
9. Christmas gifts during Christmas or major anniversary celebrations not exceeding 5,000 per
annum.
10. Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of the
basic minimum wage on a per region basis.
11. Benefits received by an employee by virtue of a CBA and productivity incentive schemes
provided that the total monetary value received from both CBA and productivity incentive schemes
combined do not exceed 10,000 pesos per employee per taxable year.
Question: Is this list exclusive?
Ans: Yes. As provided further under RR 11-2018, all other benefits given by employers which are not
included in the above enumeration shall not be considered de minimis benefits, hence shall be
subject to income tax as well as withholding tax on compensation income.
NOTE:
The amount in excess of the limit would be taxable and subject to withholding tax on
compensation, if the recipient employee is a rank-and-file, or fringe benefits tax of 32% of a
supervisory or managerial employee. This is however subject to the rule on the 90,000 pesos
amount for the 13th month pay and other benefits within the 90,000 pesos limitation.
GSIS, SSS, Philhealth, and other
Contributions…
Section 32, B(f) of the NIRC as amended by RA 10963 or the TRAIN Law
provides that GSIS, SSS, Medicare (Philhealth) and Pag-Ibig
contributions, and union dues of individuals are not included in gross
income and are exempt.

This refers to the share of the contributions of the employees to Social

Security Systems, PhilHealth, Home Development Mutual Fund (HDMF
or Pag-Ibig fund), and Union dues for their membership in a legitimate
labor organization or labor unions.
GSIS Contributions of individuals:
“Retirement gratuities granted to qualified employees under Section
13-A of RA 8291 (GSIS Law) are exempt from income tax and
withholding tax on compensation. On the other hand, retirement
gratuities granted to employees who have not met all the qualifications
shall be subject to income tax and withholding tax on compensation.”
(BIR Ruling BIR Ruling No. 612-18 dated 5 April 2018)
Illustration:
For a CALL CENTER AGENT who receives a monthly salary of P21,000 with
mandatory annual deductions of P15,166.00 consisting of SSS, Philhealth, and
Pag-ibig contributions, the income tax is computed as:

A. Annual Salary – 252,000

B. 13th month pay and other benefits – 21,000
C. Mandatory Contributions – 15,166
Computation:
Annual Gross Income = P273,000 ( A+B+C)
Deductions and exemptions = P36,166 (B+C)
Net taxable income = P236,834

P250,000 or less are exempt from the personal income tax. Thus, the call center agent has P0.00 Tax due.