Regular Income Tax

Question 1

Inclusions in Gross Income

Answer 1

1. Compensation for services (payment for services)
2. Trade Business and Exercise of Profession (may option para sa 8% commuted tax -combined OPT and IT)
3. Gains im Dealings in properties (except subject to the 2 properties CGT)
4. Interest Income (other than subject to FIT)
5. Rent (Advance deposit is taxable.)
   NOTE: Security deposit is NOT INCOME, pang compensation sa damages/loss of lessor= CONTINGENT)
6. Royalties not subject to FIT
7. Dividends abroad (galing foreign)
8. Annuity
9. Prizes and Winnings (not subject to FIT)
10. Pension- Retirement Benefit Plan (did not meet the requirement)
11. Partner’s Share in Net Income of GPP and Exempt Joint Venture
12. Farming income
13. Tax benefits ibabalik sa GI (Bad debts Recovery, Local tax refund, abandonement loss ibabalik sa Income) ibabalik kung ANO LANG NARECOVERED. AS IS!!

Question 2

Exclusions in Gross Income

Answer 2

1. Proceeds of Life Insurance (recipient: beneficiary or employer)
2. Amount received as a Return of Premium
3. Gift, bequest, and Devises or Descent (Inheritance)
   NOTE: Income of Donated Capital is TAXABLE.
4. Compensation for injuries and sickness
5. Income EXEMPT under TREATY
6. Retirement benefits, pensions, gratuities (Requisites for Exemption)
7. Separation or Termination
   (2 Requisites for Exemption)
8. RG, SSB, and other similar benefits from ABROAD
9. US veterans administration-ADMINISTERED BENEFITS
10. SSS benefits
11. GSIS benefits
12. Investment Income in the Philippine in loans, stocks, bonds, or other domestic securities, or form interest on deposits in banks in the Philippines by:
    a. Foreign gov’t
    b.Financing institutions owned, controlled, or enjoying refinancing from FOREIGN GOV’T
    c.Intl./Regional FI established by Foreign gov’t (INTERNATIONAL COMITY)
13. Income of the Philippine gov’t and its political subdivision
14. Prizes and Awards in religious, civic….exemplary that benefits the humankind.
15. Prizes and Awards in Sports Competition granted to Athletes
    (3 requirements of exemption)
16. 13th month Pay and other benefits (does not exceed 90,000 CEILING)
17. CONTRIBUTIONS for GSIS, SSS, PhilHealth, HDMF and Union dues
18. GAINS from Sale of bonds, debentures or other certificate of indebtedness with a maturity of more than 5 yrs.
19. GAINS realized from redemption of shares in mutual fund by the INVESTOR.
20. CERTAIN BENEFITS of MWE (HHON)
21. Income exempt under special laws/subject to special tax rules
    a. BMBE income-all asset does not exceed 3M excluding land
    b. Income on sale of gold to the BSP
    c. BOI registered entities under ITH income

Question 3

Grounds for Separation Exemption

Answer 3

Death
Sickness and disability
Retrenchment
Lay off
Redundancy-no longer needed : (
Business Closure

Question 4

Regular Income Tax Model

Answer 4

Gross Income-inclusions xx
Allowable Deductions (xx)
TAXABLE INCOME xx

Question 5

Taxable Income of PURE COMPENSATION INCOME EARNER

Answer 5

Gross compensation income xx
Non-taxable compensation (xx)
TAXABLE COMPENSATION
INCOME xx

Question 6

PURE BUSUNESS/PROFESSIONAL INCOME EARNER

Answer 6

GI from Business/Profession xx
Non-operating income xx
TOTAL GROSS INCOME xx
Allowable deductions (xx)

Question 7

Business Gross Income: Sale of Goods

Answer 7

Sales xx
COGS (xx)
GI xx

Question 8

Business Gross Income: Selling of Services

Answer 8

Revenues/Gross Receipts xx
Cost of Services (xx)
GROSS INCOME xx

Question 9

NON OPERATING INCOME

Answer 9

1. Gains from dealings in properties (not subject to CGT)
2. Income distribution of GPP, taxable trust and estate or an exempt joint venture
3. Casual Active Income
4. Passive income (not subject to final tax)