FIT: Interest Income Or Yield from Banks

Question 1

Interest Income from Banks and Deposit Substitutes is applied to:

Answer 1

Peso and Foreign Currency

Question 2

Joint Accounts on Forex Deposits

Answer 2

If jointly, resident and non-resident taxpayer, 50% = exempt; 50% =15% FINAL TAX

Question 3

Earned Vs. Received

Answer 3

When EARNED=Assumed “GROSS”

When RECEIVED= Assumed “NET”-bawas na ang final tax

Question 4

When Interest Income is RECEIVED, the computation will be:

Answer 4

(Income RECEIVED/ 100%-tax withheld by payor) x Final Tax Rate

Question 5

Tax Withheld FROM basis

Answer 5

Look at the INCOME

Question 6

Tax TO BE WITHHELD basis

Answer 6

Look at the EXPENSE

Question 7

PROCEEDS ON PRE-TERMINATION OF LONG-TERM DEPOSITS OF INDIVIDUALS

Answer 7

Determine the FINAL TAX first. Then;

Principal bal.                              XX
Accrued Interest
(pre-termination year)             XX
Final Tax to be withheld         (XX)
NET PROCEEDS-Depositor      XX

Question 8

FCDU applies only to Residents with are of ____ for both individual and corporation?

Answer 8

15%

Question 9

Holding Period Tax Rate for Pre-termination of LT Deposits

Answer 9

> 3 years = 20%
3 to > 4 years = 12%
4 yrs to > 5 yrs = 5%
5 yrs or more = 0%

Question 10

Final Tax on Interest Income

Answer 10

ST Deposits:
I-20%
C-20%

LT-Deposits:
I-Exempt
C-20%

Exception:
NRA-NETB-25%
NRFC-30%

Question 11

Final Tax on Interest applies only to:

Answer 11

1. Deposit substitutes
2. Government Securities
3. Money market placement
4. Trust funds
5. Investment prescribed by BSP and is evidenced by a certificate

Question 12

Farming Operations

Answer 12

Raise and Sell Operation:
Proceeds on the sales=included in GI subject to RIT
Animal raising expenses=deductions against GI

Purchase and Sell operation:
Gross profit from NET SALE=included in GI

Question 13

RECOVERY OF PAST DEDUCTIONS

Answer 13

things to look at:

Did it result to a TAX BENEFIT to the taxpayer?
If yes, it must be REVERTED BACK to GROSS INCOME in the “YEAR OF RECOVERY”

Question 13

RECOVERY OF PAST DEDUCTIONS

Answer 13

things to look at:

Did it result to a TAX BENEFIT to the taxpayer? EITHER DIRECTLY OR INDIRECTLY.
If yes, it must be REVERTED BACK to GROSS INCOME in the “YEAR OF RECOVERY”

Note: NOLCO has an expiration ( 3 yrs only). You can’t carry it over if it is already EXPIRED.
For the years 2020-2021, NOLCO expiration period is 5 consecutive years.

Question 14

Income tax due and income tax still due are different terms.

Answer 14

Income Tax Due:

Total Gross Income
less: Allowable deductions
Taxable net income
x tax rate
INCOME TAX DUE
less: CWT
INCOME TAX STILL DUE

Question 15

CWTs are advances to Annual Income Tax Due and are deductible (creditable)