GROSS INCOME + reprint starting dedudctions of 8.

Annuities
gross income) 9. Prizes and Winnings – that are not subject to FIT
10. Pensions
RIT – those that are not subject to final tax or cgt on passive 11. Partner’s share in net income of the GPP and JV
income. Most are from active sourcs, like business, trade, or
OTHER SOURCES OF GROSS INCOME
profession.
1. Farming
Types of RIT
a. Livestock and Farm Products RAISED AND SOLD
1. Progressive Income Tax – to individuals, taxable – SELLING PRICE (less expenses)
estates, and trusts b. Livestock and Farm Products PURCHASED AND
250K below – O% SOLD – accounting GROSS INCOME (Sales less
250K-400K – 15% of th excess over 250K COGS and Expenses)
400K-800K – 22.5k + 20% of the excess over 400K 2. Tax Benefits – deductions or taxes RECOVERED.
800K – 2M – 102.5k + 25% of th excess over 800K
a. Bad Debt Recovery
2M – 8M – 402.5K + 30% of the excess over 2M
b. Tax refund – except those that not enter the
8M up – 2,202,500 +35% of the excess over 2M
determination of Gross Income:
- Estate or Donor’s Tax
2. Corporate Income Tax – for corps, partnrships, and - Stock Transaction Tax
joint ventures - Income Tax paid to foreign country
- Phil. Income Tax, except FBT
SOURCES OF GROSS INCOME SUBJECT TO REGULAR TAX - Special Assessment
c. Unamortized Cost of Property abandoned and
1. Compensation for Services written off but was use again
2. Trade, Business, or Exercise of a Profession – income
form these are RIT, except when taxpayer qualified REQUISITES ON TAXABILITY OF EXPENSE RECOVERED:
and opted to: a. The expense is claimed as deduction against
a. 8% commuted tax for gross income on previous years.
self-employed/professionals b. The expense resulted as tax benefit
b. 5% preferential income tax for registered export 3. Cancellation of Indebtedness
enterprise a. In consideration of service – treated as
c. Tax holiday incentive as a registered business compensation of income
enterprise b. No consideration – gift taxable under Donor’s
3. Gains derived from dealings in properties Tax
4. Interests – other than those subject to final tax. c. By a corp in favor of a shs – as declaration of
EXCEPT: dividends subject to final tax
a. Interest income under the Land/Agrarian 4. Damage Recovery
reform a. Compensatory Damages – return of capital,
b. Imputed Interest (not stated interest) hence, not taxable (moral, liberal, slander,
5. Rents & Leasehold Income breach, etc.)
SPECIAL CONSIDERATIONS: b. Recovered Damages – recoveries of lost profit
a. Obligations of the lessor assumed by lessee are (patent infringement suit, crop and livestock
additional rental consideration. insurance)
b. Advance Rentals: EXCLUSIONS FROM GROSS INCOME
- IF UNRESTRICTED, entire amount is income
at the time of receipt 1. Proceeds of a Life Insurance Policy – EXEMPT.
- IF CONSTITUTES A LOAN, not rent income However, if proceeds are retained by the insurer
- AS SECURITY DEPOSIT, income only when under an agreement to pay interest, GROSS INCOME.
event makes it the lessor property occurs 2. Return of Premium – considered as return of
- IF APPLIED AT THE TERMINATION OF LEASE, principal only.
income at the time of receipt 3. Gifts, Bequests, and Devises or Descent – Taxable as
- IMPROVEMENTS, Outright and Spread-Out a rule. Income of these are GROSS INCOME
4. Compensation for Injuries and Sickness – amounts
6. Royalties – those that are not subject to FIT received under accident or health PLUS damages
7. Dividends – from foreign corps, pre-dominance test whether by suit or agreement.
EXEMPTION: if the recipient is a Domestic Corp. and pre- 5. Income exempt under treaty – income of any kind by
dominance ration is atleast 50%. If not, exempt when any treaty obligation binding upon the gov of th ph.
these 3 are met: 6. Retirement Benefits, Pensions, Gratuities, etc.
a. Recipient DC owns atleast 20% in FC voting stocks (with retirement plan and BIR registered)
b. Stocks investment in FC is held for atleast 2 yrs a. Must be First-time availment
c. Divided in reinvested in the Ph before the end of the b. Must be 10 yrs of cumulative service
following year. c. Must be at least 50 years old
Cash Dividend
Property Dividend – taxable @FV. This include stock of another corp (if without retirement plan and not BIR Registered):
declared by the distributing corp. Retirement benefit under 7641
Stock Dividend – GR: no taxable, XPN: with different rights. If taxable, a. Must be at least 60 years old
@FV
b. Must have served the company for at least 5
Liquidating Dividends – considered as an exchange or sale of property
years
 20. Gains and Interest Income realized from redemption
Reasonable private benefit plan – pension, gratuity, stock
of shares or unit of participation in mutual fund and
bonus, or profit sharing plan maintained and contributed by
UITFs by the investor.
employer fro the purpose of distributing the corpus (principal)
21. Income EXEMPTED UNDER SPECIAL LAWS OR RULES
or earnings.
a. Income of BMBE (Brgy. Micro Business
7. Separation or Termination Enterprise)
a. Must be due to sickness, death, or other b. Income om sale of gold to BSP
physical disability c. Income of BOI-registered entities under ITH
b. Any cause BEYOND the control of the employee
or official (ex: closure of business or
redundancy)
8. Retirement Gratuities, SSS and other similar gov
benefits – private or public, by resident or non
resident citizens or aliens who come to settle
PERMANENTLY in the Ph.
9. US Veterans Administrations – under the laws of US
received by any person residing in the PH.
10. SSS Benefits – under RA 8282
11. GSIS Benefits – under RA 8291, including retirement
gratuities received by gov officials and employees
12. Investment Income in the PH in loans, stocks, bonds,
or other domestic securities, or form interest on
deposits in ph banks by:
a. Foreign Governments
b. Financing institutions owned and controlled by
foreign government
c. International or regional fin insti established by
foreign government
13. Income of the government and its political
subdivisions from:
a. Any public utility
b. Exercise of essential government function
14. Prizes and Award in recognition of religious,
charitable, scientific, educational, artistic, literacy, or
civic achievements only if:
a. Received without any action on recipient’s part
b. Recipient is not required to render substantial
future services as a condition
15. Prizes and Awards in Sport Competition granted to
athletes:
a. In local or internationa competitions
b. Whether held in ph or abroad
c. Sanctioned by their national sports commission
(Phil. Olympic Committee, Palarong Pambansa)
16. 13th Month Pay and other benefits – provided not to
exceed the 90,000 ceiling (non-adjustable to
inflation)
17. Benefits of Minimum Wage Earners (HHON)
18. Contributions for GSIS, SSS, PhilHealth, HDMF, and
Union Dues – netted with the compensation income

NOTE: Contributions to PERA (Personal Equity and

19. Gains from sale of bonds, debentures, or other

NOTE: Interest Income form gov. securities are now