MODULE 6 - INCLUSIONS AND EXCLUSIONS FROM GROSS INCOME.pdf...

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INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE Department of Accountancy INCOME TAXATION 1st Sem 2020 Page | 1 MODULE 6 INCLUSIONS AND EXCLUSIONS FROM GROSS INCOME MEANING OF TAXABLE INCOME 1. For Individual taxpayers under graduated tax rate, Domestic and Resident Foreign Corporations Pertinent ITEMS OF GROSS INCOME less DEDUCTIONS authorized for such types of income by this Code or other special laws. Applicable to individual taxpayers using graduated tax rate and DC and RFC. 2. For individual taxpayers who are purely self-employed individuals and availed the 8% income tax rate The gross sales/receipts and other non-operating income in excess of the Php 250,000 of purely self- employed taxpayer who availed of the 8% optional income tax 3. For individual taxpayers who are Mixed Income Earners and who availed the 8% income tax rate The gross sales/receipts and other non-operating income without the Php 250,000 of Mixed Income Earner who availed of the 8% optional income tax COMPUTATION Individuals under graduated and DC and RFC Purely Self-Employed Mixed Income Earner who opted 8% Tax Gross income xxx Less: Deduction xxx Taxable income xxx Tax due xxx* Less: tax credits xxx Payable/Over-payment xxx *graduate tax rate IND; 30% for DC and RFC The Php 250,000 deduction for individual taxpayers is integrated in the 1 st tier of graduated tax table GS/GR xxx Add: NOI xxx Total xxx Less: Deduction 250,000 Taxable income xxx Multiply by rate 8% Tax due xxx Less: Tax credits xxx Payable/Overpayment xxx *NOI-Non-operating income Total Compensation xxx Less: Non-taxable comp xxx Taxable comp income xxx Less: Deduction 250,000 Taxable compensation xxx Tax due (graduated rate) xxx Add: Tax due from business: GS/GR xxx Add: NOI xxx Taxable income xxx Multiply by rate 8% Tax due from business xxx Total tax due xxx Less: Tax credits xxx Payable (Overpayment) xxx INCLUSIONS FROM GROSS INCOME Definition of Gross Income Except as otherwise provided, Gross Income means ALL INCOME DERIVED FROM WHATEVER SOURCES including but is not limited to the following: Compensation Interests Dividends Pensions Gross income from trade Rents Annuities Partner s share in income of GPP Gains Royalties Prizes/Winnings 1. Compensation for services in whatever form paid, including but not limited to fees, salaries, wages, commissions, and similar items Compensation means all remuneration for services performed by an employee for his employer under an employer-employee relationship, unless specifically excluded by the Code. The name by which the remuneration for services is designated is immaterial. Salaries and wages Emoluments Honoraria Allowances Commissions (e.g. transportation, representation, entertainment and the like) Fees including director’s fees
INSTITUTE OF ACCOUNTS BUSINESS AND FINANCE Department of Accountancy INCOME TAXATION 1st Sem 2020 Page | 2 Taxable bonuses Fringe benefits (except those which are subject to FBT under Section 33 and the allowable de minimis benefits) Taxable pensions Retirement pay Unliquidated advances

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