OPTIONAL STANDARDS

DEDEUCTION
OPTIONAL STANDARD
DEDUCTION
•Is a method of deduction in
computing taxable income to
be subjected to graduated
income tax rate.
LEGAL BASIS
•OSD is found in section
34(L) of the National
Internal Revenue code of
1997, as amended
•In lieu of the Deduction allowed the
proceeding Subsections, an individual
subject to tax under Section 24, other
than a non-resident alien, may elect a
standard deduction in an amount not
exceeding forty percent (40%) of its
Gross Sales or Gross Receipts, as the
case may be.
 FOR INVIDUAL
TAXPAYERS

GROSS SALES/RECIEPTS 100%

LESS: DEDUCTION (OSD) 40%
TAXABLE INCOME 60%
•In the case of a Corporation
subject to tax under Section 27(A)
and 28(A)(1), it may elect a
Standard Deduction in an amount
not exceeding forty percent (40%)
of its Gross Income as define in
Section 32 of this Code.
 FOR NON-INVIDUAL
TAXPAYERS
GROSS SALES/RECIEPTS XX
LESS: COST OF SALES/SERVICES XX
GROSS INCOME 100%
LESS: DEDUCTION (OSD) 40%
TAXABLE INCOME 60%
What are the benefits in availing the
Optional Standard Deduction?
FOR INDIVIDUAL
TAXPAYERS
FOR NON-INDIVIDUAL
- NO NEED TO
TAXPAYERS
SUBSTANTIATE COST & - NO NEED TO
EXPENSES
SUBSTANTIATE
- NOT REQUIRED TO
EXPENSES
ATTACH FINANCIAL
STATEMENTS.
What are the DISADVANTAGE in availing the
Optional Standard Deduction?

FOR INDIVIDUAL
FOR INDIVIDUAL TAXPAYERS
TAXPAYERS - Deductions are limited to
- Deductions are limited only 40% of your Gross
Income.
to only 40% of your Gross - Still need to substantiate
Sales or Receipts. cost of sales or cost of
services.
Who can avail the Optional Standard
Deduction?

The Following can avail:

1. Resident Citizen;
2. Non-resident citizen;
3. Overseas Contract Workers;
4. Resident Aliens;
5. Estates and Trust;
6. Partnerships; and
7. Domestic and Resident Foreign
Corporation
Who cannot avail the Optional Standard
Deduction?

The Following cannot avail:

1. Purely Compensation Income
Earner;
2. Non-Resident Alien/Foreign Corp.;
3. Tax Exempt Entity on Invidual; and
4. Taxpayer subject to special Rate