CHAPTER 4

INCOME

TAXABLE NON-TAXABLE

COMPENSATION INCOME BUSINESS INCOME

GIFTS, BEQUESTS, AND
-Salary,wage or fee
LIFE INSURANCE DEVICES
-Commission GAIN FROM DEALING IN *Proceed received by heirs-exempt *Gifts- donor’s tax
-Honoraria
PROPERTY *Interest- taxable *Bequests, devices- estate tax
-Allowances: *Excess- taxable *Payment for service- Basic Tax
*COLA (NT)
*RATA (NT-subject to liquidation) PASSIVE INCOME
*PERA (NT) a.) Royalty
-13th month pay (excess of 82,000) *general- 20%
*books,literature,music- 10%
INCOME UNDER TREATY
-Holiday, overtime, night shift
b.) PRIZES AND WINNINGS
deferential, hazard pay(NT if COMPENSATION FOR INJURIES
*GENERAL- 20%
MWE-not earning other income) * Moral damages
*LESS THAN 10,000- basic tax
-Separation pay (voluntary) * Exemplary damages
*PCSO- excempt RETIREMENT BENEFITS
-Retirement pay except: * Liquidated damages
*pay fr. SSS and GSIS. * Damages for loss of earning *pay fr. SSS and GSIS
*pay fr. Employer: capacity
INTEREST INCOME *pay fr. Employer:
-approved by BIR Commissioner TAXABLE IF:
*Bank in Philippines- 20% -approved byBIR commissioner
-connected 10 years * Damages for loss of earnings in
*long-term deposit evidenced by -connected 10 years
-atleast 50 years old property
BSP -atleast 50 years old
-availed 1st time * Compensatory damages
5 years- exempt -availed 1st time
-Sick leave/vacation leave pay * Interest on non-taxable damages
4years-<5years- 5%
*NT- unused 10 days or less 3years-<4years- 12%
-Fringe benefits < 3years- 20%
*supervisory-fringe benefit tax *FCDU- 7.5% resident citizen/alien
*rank-and-file- Basic tax *otherwise stated- Basic tax