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Regular Income Tax Overview and Rules

Chapter 7 introduces the concept of regular income tax, detailing the types of taxes applicable to individuals and corporations, including exemptions and deductions. It clarifies the differences between taxable income, gross income, and non-taxable income, while outlining the filing requirements and deadlines for various taxpayers. The chapter also discusses the implications of final tax and capital gains tax on different income types.

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0% found this document useful (0 votes)

7 views16 pages

Regular Income Tax Overview and Rules

Uploaded by

nichole bulanadi

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

Chapter 7: Introduction to Regular Income Tax

Study online at [Link]

1. The P250,000 income tax exemption for individuals is False

designed to be in lieu of their personal and business
expenses

2. There are two types of regular income tax: proportion- True

al income tax for corporations and progressive income
tax for individuals

3. NRA-NETBs and NRFCs are also subject to regular in- True

come tax.

4. All taxpayers are subject to final tax. False

5. Taxable income is synonymous to net income False

6. For all taxpayers, taxable income means the pertinent False

items of gross income not subject to capital gains tax
and final tax less allowable deductions.

7. All taxpayers are subject to regular income tax. True

8. Employed taxpayers can claim expenses from their False

employment as deductions against their compensa-
tion income

9. Items of gross income subject to final tax and capital False

gains tax are excluded in gross income subject to reg-
ular income tax.

10. Non-taxable compensation are items of compensation True

that are excluded against gross income.

11. The tax due of corporations is determined by multiply- True

ing their gross income by 25%.
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Chapter 7: Introduction to Regular Income Tax
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12. The taxable compensation income is computed as True

gross compensation less the non-taxable compensa-
tion income.

13. The deadline of filing the corporate quarterly income False

tax return is the same with the deadline of the quar-
terly income tax return of individuals.

14. Business expenses can be deducted against all types False

of gross income subject to regular tax

15. No deduction shall be allowed against taxable income. True

16. Only corporations may incur deductions against gross False

income.

17. The gross income from business is measured as sales True

or gross receipts less cost of sales or cost of services.

18. The tax due of individual is determined by means of True

schedules of tax rates.

19. The deadline of annual income tax return of corpora- True

tions using the calendar year is similar to the deadline
fixed for individual taxpayers.

20. Every individual taxpayer is exempt from income tax True

on compensation up to P250,000 annually but the
same exemption does not apply to business income.

21. Which is not generally subject to regular income tax? D. Passive income

A. Compensation income

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Chapter 7: Introduction to Regular Income Tax
Study online at [Link]

B. Business income
C. Professional income
D. Passive income

22. The general rule in income taxation is C. Regular income taxation

A. Final income taxation

B. Capital gains taxation
C. Regular income taxation
D. Fringe benefit taxation

23. Active income is subject to A. Regular tax

A. Regular tax
B. Capital gains tax
C. Final tax
D. Any of these

24. Which of the following are passive incomes subject to? d. Either A or B (Regular
A. Regular Tax tax or Final tax)
B. Final tax
C. Capital gains tax

a. A only
b. B only
c. Both A or B
d. Either A or B

25. Which of the following are capital gains subject to? c. Either A or C
A. Regular Tax
B. Final tax
C. Capital gains tax

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Chapter 7: Introduction to Regular Income Tax
Study online at [Link]

a. A only
b. B only
c. Either A or C
d. Both A or C

26. The net amount of regular income subject to regular A. Taxable income
tax is called

A. Taxable income
D. Compensation income
C. Net income
D. Gross income

27. What are allowable deductions against gross income? A. Business expenses

A. Business expenses
B. Family support
C. Personal expenses by the taxpayer
D. Expenses of employment

28. Deductions are allowed to D. Taxpayers engaged in

business
A. Employed taxpayers
B. Individual taxpayers only
C. Corporate taxpayers only
D. Taxpayers engaged in business

29. Personal expenses are B. Non-deductible by any

taxpayer
A. Non deductible by employed taxpayers
B. Non-deductible by any taxpayer
C. Deductible by employed taxpayers
D. Deductible by an individual taxpayers

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Chapter 7: Introduction to Regular Income Tax
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30. Which is not a feature of the regular income tax? B. Final withholding tax

A. Net income tax

B. Final withholding tax
C. Annual tax
D. Creditable withholding tax

31. Which is true with the final withholding tax? D. It applies to certain pas-
sive income
A. The taxpayer still needs to file an annual consolidat-
ed return
B. It applies to all items of gross income
C. It constitutes a partial payment of income tax
D. It applies to certain passive income

32. Which is not true with the creditable withholding tax? B. No need to pay further
taxes
A. Advances to the annual tax due
B. No need to pay further taxes
C. Need to file annual income tax return
D. Applicable to items of regular income

33. Progressive income tax is applicable to B. Individual taxpayers

A. Corporate taxpayers
B. Individual taxpayers
C. Compensation earners only
D. Individuals in business only

34. Proportional regular income tax is applicable to A. Corporations only

A. Corporations only
B. Compensation earners only

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Chapter 7: Introduction to Regular Income Tax
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C. Individuals engaged in business

D. Both individuals and corporations

35. Which of the following individual taxpayers is not sub- C. NRA-NETB

ject to tax on taxable income?

A. Non-resident citizen
B. Resident alien
C. NRA-NETB
D. NRA-ETB

36. Which of the following corporate taxpayers is not sub- D. Resident foreign corpo-
ject to tax on taxable income? ration

A. Domestic corporation
B. Business partnership
C. Non-resident foreign corporation
D. Resident foreign corporation

37. Which is a source of income subject to regular income C. Trade or business or ex-
tax? ercise of a profession

A. Employment
B. Casual sales transactions
C. Trade or business or exercise of a profession
D. All of these

38. Which interest income will not be included in the in- D. Interest income from
come tax return? employees

A. Interest income from bank deposits

B. Interest income from lending

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Chapter 7: Introduction to Regular Income Tax
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C. Interest income from notes

D. Interest income from employees

39. Which is not subject to final tax? A. Prizes amounting to

P11,000
A. Prizes amounting to P11,000
B. Interest income from bank deposits
C. Winnings from the Philippines
D. Share in the net income of general professional
partnership

40. Which of the following is a passive income but is nev- A. Prizes amounting to
ertheless subject to regular tax by virtue of exclusion P10,000
under final income taxation?

A. Prizes amounting to P10,000

B. Service income
C. Merchandising income
D. Dividends from domestic corporations

41. Which is an incorrect statement? A. Business expenses are

deductible by individuals
A. Business expenses are deductible by individuals and and corporations
corporations
B. Purely employed taxpayers are not allowed deduc-
tions from gross income
C. Personal expenses are deductible by individuals,
estates and trusts
D. Deductions are considered int he determination of
net income

42. The following may be relevant in the determination of D. b and d only (gross in-
taxable income come subject to final tax

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Chapter 7: Introduction to Regular Income Tax
Study online at [Link]

and exclusions from gross

a. Gross income subject to regular tax income)
b. Gross income subject to final tax
c. Deductions from gross income
d. Exclusions from gross income

Which is not considered in the determination of tax-

able income?
A. a and b
B. c and d
C. a and c
D. b and d only

43. Which is a correct statement regarding exclusion in D. They are subject to final
gross income? tax

A. They are included in gross income subject to regular

income tax
B. They are ignored in the determination of gross in-
come
C. They are presented in gross income but are present-
ed as deductions
D. They are subject to final tax

44. Which of these types of employees may be subject to C. Rank and file employees
final fringe benefit tax?

A. Managerial employees
B. Supervisory employees
C. Rank and file employees
D. A and B

45. D. Sale of scrap

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Chapter 7: Introduction to Regular Income Tax
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Which is not considered an operating income?

A. Consignment commission income by a retail store

B. Fees from the rendering of services
C. Interest income from advances to employees
D. Sale of scrap

46. Which is a non-operating income? A. Gain on sale of office

building
A. Gain on sale of office building
B. Sale of goods by a retail store
C. Gate receipts of cockpits
D. Gate receipts of cinemas

47. Which of the following will least likely to be considered B. Gain on sale of bonds
an operating income of a security dealer?

A. Gain on sale of stocks

B. Gain on sale of bonds
C. Dividend income from domestic corporations
D. Interest income from bonds

48. The distinction between operating and non-operating A. Self- employed individ-
income is not required in the income tax return of uals in business

A. Self- employed individuals in business

B. Mixed income earners
C. Self-employed professionals
D. Purely employed individuals

49. The reporting classification of gross income into oper- D. Neither A nor B
ating and non-operating is unnecessary for

A. Corporate taxpayers
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Chapter 7: Introduction to Regular Income Tax
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B. Individual taxpayers
C. Both A and B
D. Neither A nor B

50. Which is not part of compensation income? A. Basic pay of rank and file
employees
A. Basic pay of rank and file employees
B. Fringe benefits of managerial and supervisory em-
ployees
C. Basic pay of managerial or supervisory employees
D. Fringe benefits of rank and file employees

51. Who cannot claim deductions? B. Self-employed taxpay-

ers in business
A. Employed taxpayers
B. Self-employed taxpayers in business
C. Self-employed professional taxpayers
D. B and C

52. Who are required to file quarterly declaration of in- A. Individuals engaged in
come? business

A. Individuals engaged in business

B. Corporations and individuals engaged in business
c. Corporations
D. All individuals and corporations

53. Mr. Peralta wishes to file his 2021 income tax return. To B. April 15, 2022
avoid penalty, he must file his return on or before

A. April 15, 2021

B. April 15, 2022

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Chapter 7: Introduction to Regular Income Tax
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C. August 15, 2022

D. November 15, 2022

54. An individual taxpayer must file his income tax return B. August 15, 2021
for the third quarter of 2021 on or before

A. April 15, 2022

B. August 15, 2021
C. November 15, 2022
D. November 15, 2021

55. Talisay Corporation is filing its income tax return for D. March 29, 2021
the quarter ending February 28, 2021. The return must
be filed on or before

A. April 15, 2022

B. August 15, 2021
C. April 29, 2021
D. March 29, 2021

56. Which of these taxpayers is required to file an income C. Aliens classified as

tax return? NRA-NETBs

A. An employee covered by the substituted filing sys-

tem
B. A taxpayer deriving purely passive income subject
to final tax
C. Aliens classified as NRA-NETBs
D. A resident citizen who derives his entire income
from sources outside the Philippines

57. The taxable income of corporate taxpayers is the

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Chapter 7: Introduction to Regular Income Tax
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A. Net income from business D. Taxable compensation

B. Net income from business less personal exemption income plus net income
C. Taxable compensation income from business
D. Taxable compensation income plus net income from
business

58. The taxable income of a pure compensation income A. Net income from busi-
earner is the ness less personal exemp-
tion
A. Net income from business less personal exemption
B. Taxable compensation income plus net income from
business
C. Taxable compensation income
D. Net income from business

59. The taxable income of a mixed income earner is C. Taxable compensation

income
A. Net income from business less personal exemption
B. Net income from business
C. Taxable compensation income
D. Taxable compensation income plus net income from
business

60. The taxable income of a pure professional income D. Net income from pro-
earner is the fession less personal ex-
emption
A. Net income from business
B. Taxable compensation income
C. Taxable compensation income plus net income from
business
D. Net income from profession less personal exemp-
tion

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Chapter 7: Introduction to Regular Income Tax
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61. Which if the following statements is incorrect with re- D. The other income is
spect to the determination of the taxable income of simply ignored in the com-
individual taxpayers with other income? putation of taxable income

A. The other income of pure compensation earners is

simply included in taxable compensation income
B. The other income of a professional income earner
is included as part of non-operating income and is
included in net income
C. The other income of a mixed earner is also treated
as part of non-operating income and is included in net
income
D. The other income is simply ignored in the computa-
tion of taxable income

62. Statement 1: Individuals with higher income are sub- D. Neither statement 1 nor
ject to higher tax rates 2
Statement 2: Corporations with higher income are sub-
ject to higher tax rates

Which is correct regarding the regular income tax?

A. Statement 1 only
B. Statement 2 only
C. Both Statements 1 and 2
D. Neither Statement 1 nor 2

63. Which is incorrect in the determination of the taxable A. In the income tax return,
income of individual taxpayers? there is no instance where
the taxable compensation
A. In the income tax return, there is no instance where income of taxpayers could
the taxable compensation income of taxpayers could become negative
become negative
B. A net operating loss is deductible against taxable
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Chapter 7: Introduction to Regular Income Tax
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compensation income
C. The taxable compensation income is added to the
net income from business
D. Personal exemption is no longer deductible against
compensation income

64. Statement 1: corporations with the same net income B. Statement 2

may not have the same tax due
Statement 2: individuals with the same net income
may not have the same tax due.

Which statement is incorrect regarding the regular in-

come tax?

A. Statement 1
B. Statement 2
C. Both statements 1 and 2
D. None

65. A purely engaged in business individual taxpayer us- A. BIR Form 1701A
ing itemized shall use

A. BIR Form 1701A

B. BIR Form 1701
C. BIR Form 1700
D. BIR Form 1702

66. BIRM Form 1701 is not intended for C. Pure professional in-
come earner under OSD
A. Estate
B. Trust
C. Pure professional income earner under OSD
D. Mixed income earner
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Chapter 7: Introduction to Regular Income Tax
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67. BIR Form 1700 is intended for C. Pure compensation in-

come earner
A. Trust
B. Estate
C. Pure compensation income earner
D. Pure business or professional income earner