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INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

CHAPTER 11

INCOME TAX OF INDIVIDUALS

Problem 11 1 TRUE OR FALSE
1. False interest income under expanded foreign currency deposit of a nonresident
alien is exempt from income tax in the Philippines.
2. False taxable for income within only.
3. True
4. True
5. False the installment payment of income tax due for individuals is allowed only
when the income tax due is more than P2,000.
6. True
7. False the income of a senior citizen is to be tax just like a minimum wage earner.
8. True
9. False the quarterly income tax return of a self-employed taxpayer is not subject to
personal exemption, only his adjusted annual income tax return.
10. True
11. False No personal exemption is allowed to NRANEBT.
12. True
Problem 11 2 TRUE OR FALSE
1. True
2. False a Filipino special taxpayer has the option to be taxed using final tax of 15% or
normal tax of 5% to 32%.
3. True
4. True
5. False subject to creditable withholding income tax.
6. True.
7. False Tax credit of income taxes paid outside the Philippines is allowed only for
resident Filipino citizen and domestic corporation.
8. False The creditable withholding tax is 15%.
9. False Gross income includes other income but not compensation income.
10. False tax-exempt
11. True
12. False Only Philippine lotto and sweepstakes are tax-exempt.
Problem 11 3
1. A
2. C
3. D
4. A
5. D
6. C
7. B
8. D
9. D
10. B

Problem 11 6

Problem 11 4
1. D
2. C
3. B
4. A
5. C
6. B
7. D
8. D
9. B
10. C

Problem 11 5
1. C
2. B
3. A
4. D
5. D
6. B
7. B
8. D
9. D
10. A

Basic personal exemption

Additional exemptions for:

P50,000

90

INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

Mentally retarded legitimate son (40 years) old

Illegitimate daughter (10 years old)
Adopted child (6 years old)
Total deductions allowed

P25,000
25,000
25,000

75,000
P125,000

For additional exemption of the taxpayers dependent, the Tax Code defines a
dependent as a legitimate, illegitimate or legally adopted child chiefly dependent
upon and living with the taxpayer. Subject to the conditions that such dependent is
not more than twenty-one (21) years of age, unmarried and not gainfully employed
or if such dependent, regardless of age, is incapable of self-support because of
mental or physical defect. The additional exemption of P25,000 per child is granted
to a maximum of 4 qualified dependent children. [Sec. 35 (B), NIRC as amended by
R.A. 9504]
A taxpayer supporting a senior citizen is not allowed to claim additional exemption.
The Baybay vs. CIR, CTA Case No. 5280 dated Dec. 20, 1996 is no longer applicable
because the most recent Tax Laws R.A. 8424 of January 1, 1998 and R.A. 9504 of
June 6, 2008 provides that additional exemption shall apply to qualified dependent
children. When the law does not include it excludes. The old CTA decision is
superseded by the two Special Laws R.A. 8424 & R.A. 9504 which are superior to
CTA decision. Furthermore, Rev. Regs. No. 4 2006, Sec. 7 last paragraph provides
that No personal exemption is allowed for senior citizen.
It must be noted that the principle of lex posteriori derogate priori the
more recent law governs.
Problem 11 7
C
Basic personal exemption
Additional exemption (a & b only) (P25,000 x 2)
Total personal and additional exemptions
Problem 11 8
Not in the choices = P70,000.
Basic personal exemption reciprocity
Add: Additional exemption reciprocity (P10,000 x 2)
Basic personal exemption married

P50,000
50,000
P100,000
P 50,000
20,000
P 70,000

When there is reciprocity, nonresident alien engaged in business in the Philippines is allowed
of personal exemptions subject to limit. The term personal exemption in the Philippines
includes both the basic personal exemption (Sec. 35 (A), NIRC) and additional exemption for
qualified dependent children not exceeding four. (Sec. 35 (B), NIRC)
Problem 11 9
D
Zero. Maria has no income.
Problem 11 10
A
Income from the Philippines (P10,000 x 12)
Less: Personal exemption
Income subject to tax in the Philippines

P120,000
50,000
P 70,000

91

INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

Note: Income earned by OFW outside the Philippines is not subject to tax in the Philippines.
The income from the sari-sari store in the Philippines is earned from January to December of
the taxable year.
Problem 11 11
Not in the choices =P487,500.
Gross compensation income Philippines (P250,000 x 12)
Add: 13th month pay
Total taxable compensation
Multiplied by special income tax rate
Income tax payable

P3,000,000
250,000
P3,250,000
15%
P 487,500

The entire compensation income is subjected to 15% tax rate.

Problem 11 12
C
Gross compensation income within (P150,000 x 6)
Add: Taxable 13th month pay [(P150,000/2)
Bonus
Total amount subject to final tax
Multiplied by special income tax rate
Income tax payable

P 900,000
75,000
50,000
P1,025,000
15%
P 153,750

If the special taxpayer is an alien and qualifies to be taxed using 15% special tax rate, all of
his gross compensation income is subject to 15% final tax. Take note that the 13 th month pay
amounting to P30,000 is included as taxable compensation because the tax rate has been
reduced to 15%.
Problem 11 13
B
Annual salary (P65,000 x 12 months)
Annual cost of living allowance (P5,000 x 12 months)
13th month pay (P780,000/12)
Gross compensation income
Less: Nontaxable 13th month pay
Taxable gross compensation income
Less: Personal exemption basic
Net taxable income

P780,000
60,000
65,000
P905,000
30,000
P875,000
50,000
P825,000

Tax on P500,000
Tax on excess [(P825,000 P500,000) x 32%]
Income tax due

P125,000
104,000
P229,000

Since the compensation income is below the threshold of P975,000 per year of a Filipino
Citizen Employed by Regional or Area Headquarters and Regional Operating Headquarters of
Multinational Companies, his compensation income shall be subject to a regular tax for
individuals. (Sec. 1, Rev. Regs. No. 11-2010)
Take note that if the special Filipino taxpayer opted to be tax using normal tax, the 13 th
month pay is deducted as nontaxable income.

Problem 11 14

Gross compensation income

Add: Net income from rent

P200,000

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INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

Rent income
Less: OSD (P50,000 x 40%)
Net income before personal exemption
Less: Basic personal exemption
Premium payments on hospitalization
insurance, limit
Net taxable income

P50,000
20,000

30,000
P230,000

P50,000
2,400

52,400
P177,600

For individual taxpayers, only gross sales or gross receipts are allowed as the basis
of OSD (Sec. 34(L), NIRC; RA 9504).
The Baybay vs. CIR, CTA Case No. 5280 dated Dec. 20, 1996 is no longer applicable
because the most recent Tax Laws R.A. 8424 of January 1, 1998 and R.A. 9504 of
June 6, 2008 provides that additional exemption shall apply to qualified dependent
children. When the law does not include it excludes. The old CTA decision is
superseded by the two Special Laws R.A. 8424 & R.A. 9504 which are superior to
CTA decision. Furthermore, Rev. Regs. No. 4 2006, Sec. 7 last paragraph provides
that No personal exemption is allowed for senior citizen.
It must be noted that the principle of lex posteriori derogate priori the
more recent law governs.
Problem 11 15
1.

Letter B
Compensation income
Business and other income:
Professional income (P300,000 + P200,000)
Interest income without
Dividend income without
Total business and other income
Less: OSD (P600,000 x 40%)
Net business income
Total net income before personal exemption
Less: Basic personal exemption
Net income to ITR tabular tax

Subject to
Tabular tax
P240,000
500,000
60,000
40,000
P600,000
( 240,000)
P360,000
P600,000
( 50,000)
P550,000

Interest income within

Dividend income within
Income subject to final tax
2.

Letter A
Compensation income
Business income:
Professional income, net of OSD (P300,000 x 60%)
Total net income before personal exemption
Less: Basic personal exemption
Net income to ITR tabular tax
Interest income within
Dividend income within
Income subject to final tax

Final tax

P100,000
60,000
P160,000
P240,000
180,000
P420,000
50,000
P370,000
P100,000
60,000
P160,000

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Chapter 11: Income Tax of Individuals

Problem 11 16

Net taxable income, net of withholding tax

Tax on P140,000
Tax on P250,000
Less: Withholding tax
Net tax payable

Husband
P140,000
P22,500

P50,000
45,000
P5,000

20,000
P 2,500

Problem 11 17
B
Compensation as researcher
Less: Personal exemption basic
Net taxable compensation income
Tax on P500,000
Tax on excess (P50,000 x 32%)
Total income tax from compensation
Dividend income tax (P120,000 x 10%)
Interest income tax (P500,000 x 7.5%)
Total income tax due
Problem 11 18
D
Capital gains tax on shares of stock (P80,000 x 5%)
Capital gains tax on sale of land (P2,000,000 x 6%)
Total capital gains tax paid
Problem 11 19
1.
Letter B
Final tax on copyright royalty (P11,250/90%) x 10%
Final tax on mineral claim royalty (P12,000/80%) x 20%
Final tax on share from trading partnership as dividend (P270,000/90%) x
10%
Total final tax
2.

Wife
P250,000

P 600,000
50,000
P 550,000
P125,000
16,000
P141,000
12,000
37,500
P190,500
P

4,000
120,000
P124,000

P 1,250
3,000
30,000
P34,250

Letter D
None. All reported earnings are subject to final tax.

Problem 11 20
B
Percent of service
Add: Output VAT
Total
Less: Withholding tax
Percent of net proceeds

100%
12%
112%
20%
92%

Net proceeds
Divided by percent of net proceeds
Service fee

P 92,000
92%
P100,000

Withholding tax (P100,000 x 20%)

P 20,000

VAT (P100,000 x 12%)

P 12,000

Problem 11 21
1. Letter A
Salaries of assistants

P 96,000

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INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

Traveling expenses
Light and water, Office
Stationeries and supplies
Office rent
Total expenses before contribution
Add: Contribution subject to limit (P500,000 P176,850) x 10%
Total allowable deductions
2.

3.

Letter C
Professional fees
Less: Allowable deductions
Net income from business
Add: Income from compensation:
Allowance as director of Corporation A
Commissions
Net income before personal and additional exemptions
Letter D
Net income before personal and additional exemptions
Less: Personal and additional exemptions:
Basic widower
Additional exemptions (P25,000 x 3 qualified children)
Net taxable income

11,000
7,890
1,960
60,000
P176,850
32,315
P209,165
P500,000
209,165
P290,835
P25,000
5,000

P320,835
P 50,000
75,000

Tax on P140,000
Tax on excess (P55,835) x 30%
Income tax due
Problem 11 22
1. Using itemized deduction
Compensation income
Gross income from business
Less: Itemized deduction
Total income before personal exemptions
Less: Personal exemptions
Basic personal exemptions
Additional exemptions (P25,000 x 4)
Taxable income

125,000
P195,835
P 22,500
13,959
P 36,459

P 20,000
P 400,000
150,000
P 50,000
100,000

Computation of income tax:

Tax on P70,000
Tax on excess (P50,000) x 20%
Income tax before withholding tax
Less: Withholding tax
Income tax due and payable
2. Using optional standard deduction
Compensation income
Gross income from business
Less: Optional standard deduction (40%)
Total income before personal exemptions
Less: Personal exemptions
Basic personal exemptions
Additional exemptions (P8,000 x 4)

30,000
P320,835

250,000
P270,000
150,000
P120,000
P 8,500
10,000
P 18,500
1,000
P 17,500

P 20,000
P 400,000
160,000
P 50,000
100,000

240,000
P260,000
150,000

95

INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

Taxable income

P110,000

Computation of income tax:

Tax on P70,000
Tax on excess (P40,000 x 20%)
Income tax before withholding tax
Less: Withholding Tax
Income tax due and payable
Problem 11 23
1. P71,200
Net worth, December 31, 200B
Less: Net worth, December 31, 200A
Unadjusted net income for year 200B
Add back: Non-deductible expenses
Contributions (P20,000 + P50,000)
Total
Less: Non-taxable income
Income before contribution
Less: Contributions:
Deductible in full
With limit
Actual, P50,000
Limit, P268,000 x 10% = P26,800
Allowed
Net income before personal exemptions
Less: Personal exemptions (P50,000 +p100,000)
Net taxable income
2.

P 8,500
8,000
P 16,500
1,000
P 15,500

P375,000
325,000
P 50,000
150,000
70,000
P270,000
2,000
P268,000
P 20,000

26,800

P47,000
Corrected net taxable income
Less: Reported net income subject to tax
Unreported taxable income

Problem 11 24
200B net income from business
Capital gains transactions
Short-term capital gains (P40,000 x 100%)
Long-term capital gains (P30,000 x 50%)
Short-term capital loss (P10,000 x 100%)
Net capital gains
Less: 200A Capital loss carry over limit
Income before personal exemptions
Basic personal exemption- married
Additional exemption (P25,000 x 3)
Taxable income, 200B

46,800
P221,200
150,000
P 71,200
P 71,200
24,200
P 47,000
P 600,000

P 40,000
15,000
(10,000)
P45,000
35,000
P 50,000
75,000

10,000
P 610,000
125,000
P 485,000

Note: The applicable capital loss carry-over should only be limited to P35,000, because it
should not exceed the net income from operation of such year (Sec. 39D, NIRC).
Problem 11 25
1.
Compensation income (P240,000 + P30,000)
Less: Personal exemption (P50,000 + P25,000)
Net taxable compensation
Business income

P270,000
75,000
P195,000
P100,000

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INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

Less: Business expenses

Net loss from business
Net taxable income
2.

120,000
(P20,000)

0 P195,000

Tax on P140,000
Tax on excess (P55,000 x 25%)
Income tax due
Less: Tax credit
Income tax still due and payable

Problem 11 26
1.
Salary (P30,000 x 12)
Add: Taxable 13th month pay (P35,000 P30,000)
Total
Less: SSS contribution
Medicare/Philhealth contribution
Taxable compensation income before personal
exemption
Less: Personal exemption
Net taxable compensation income

P22,500
13,750
P36,250
30,000
P 6,250
P360,000
5,000
P365,000
P3,000
2,000

5,000
P360,000
50,000
P310,000

Estimated income tax due:

Tax on P250,000
Tax on excess (P60,000 x 30%)
Total income tax due per year
Divided by number of months in a year
Monthly withholding tax
2.

P50,000
18,000
P68,000
12
P 5,667

Quarterly business income tax

Business income per quarter
Less: Business expense per quarter
Net income per quarter

P200,000
120,000
P 80,000

Tax on P70,000
Tax on excess (P10,000 x 20%)
Quarterly business income tax per quarter
Problem 11 27
1.
Entertainment fee (P1,700,000/85%)
Business income
Philippines
Japan
Total gross income
Less: OSD (P3,500,000 x 40%)
Net income before personal exemption
Less: Personal exemption - basic
Additional (P25,000 x 4)
Net taxable income
2.

Tax on P500,000
Tax on excess (P1,450,000 x 32%)
Income tax due

3.

Tax credit
Creditable withholding tax on fees

8,500
2,000
P 10,500
P2,000,000
500,000
1,000,000
P3,500,000
1,400,000
P2,100,000
P50,000
100,000

150,000
P1,950,000
P 125,000
464,000
P 589,000

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INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

SUGGESTED ANSWERS

Chapter 11: Income Tax of Individuals

(P2,000,000 x 15%)
Business income tax paid - Philippines
Japan (P589,000 x 594,000*/2,100,000))
P166,603 vs. actual P300,000, lower
4.

P300,000
40,000
166,603

Income tax still due (P589,000 P506,603)

P 506,603
P 82,397

Supporting computation of net taxable income before personal exemptions:

Gross receipts
Percent

Within
2,500,000
71%

Outside
1,000,000
29%

Total
3,500,000
100%

Allocated OSD x percent

Net income before personal exemption

994,000
1,506,000

406,000
594,000

1,400,000
2,100,000

Problem 11 28
Gross professional income (P100,000/90%)
Rent income (P300,000/2)
Total gross income
Less: OSD (40%)
Net income from business
Add: Gross compensation income
Total
Less: Personal exemptions
Net taxable income
Tax on P140,000/ P250,000
Tax on excess:
Mr. Bravo (P91,667 x 25%)
Mrs. Bravo (P90,000 x 30%)
Income tax due
Withholding tax on compensation
Withholding tax on professional income (P111,111 P100,000)
Income tax still due and payable

Mr. Bravo
P111,111
150,000
P261,111
104,444
P156,667
225,000
P381,667
150,000
P231,667

Mrs. Bravo

P 22,500

P 50,000

22,917
.
P 45,417
( 25,000)
( 11,111)
P 9,306

27,000
P 77,000
( 50,000)
.
P 27,000

Problem 11 29
1. P290,000
Compensation income
Taxable 13th month pay and bonuses (P40,000 P30,000)
Net business income (P400,000 P300,000)
Capital gains long-term (P60,000 x 50%)
Total
Less: Personal exemptions (P50,000 + P100,000)
Net taxable income
2. (P8,000)
Tax on P250,000
Tax on excess (P40,000 x 30%)
Total income tax due
Less: Income tax paid on:
Compensation
Quarterly business income
Income tax refund

P150,000
P150,000
60,000
P 90,000
300,000
P390,000
50,000
P340,000

P300,000
10,000
100,000
30,000
P440,000
150,000
P290,000
P
P

50,000
12,000
62,000

(P

70,000
8,000)

P 50,000
20,000

98

INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

Problem 11 30
1.
13th month pay
Other benefits:
Excess of clothing allowance (P4,500 P4,000)
Excess of rice subsidy (P1,600 P1,500) x 12
Total (not exceeding P30,000) nontaxable
Allowable de minimis:
Clothing allowance
Rice subsidy (P1,500 x 12)
Total 13th month pay and other benefits nontaxable
2.

3.

P25,000
P 500
1,200
P4,000
18,000

Basic salary (P25,000 x 12)

Less: Personal exemptions
Net taxable compensation income

1,700
P26,700
22,000
P48,700
P300,000
150,000
P150,000

Tax on P140,000
Tax on excess (P10,000 x 25%)
Total income tax due

P22,500
2,500
P25,000

Withholding tax from January to November 200A

(P25,000/12) x 11

P22,917

Net taxable compensation income

P150,000
Add: Net business income:
Professional fees (P224,000/1.12)
P 200,000
Gross income from sales (P5,000,000 P3,200,000)
1,800,000
Less: Itemized deductions:
P2,000,000
Operating expenses, net of interest expense
(P900,000 P50,000)
P850,000
Interest expense (P50,000 (P75,000 x 33%)
25,250
824,750
Net income before contribution
P1,175,250
Less: Contribution, actual = P100,000, lower
Contribution, limit (P1,175,250 x 10%)= P117,525
100,000
1,075,250
Net taxable income
P1,225,250
Tax on P500,000
Tax on excess (P725,250 x 32%)
Total income tax due
Less: Tax credits:
WTW from Jan to Nov., 200A
WT on Professional income (P224,000 P200,000)
Income tax still due and payable on December 31, 200A

Problem 11 31
Gross income from business (P1,000,000 P700,000)
Operating expenses (P250,000 P60,000 P30,000)
Deductible interest expense (P30,000) (P20,000 x 33%)
Deductible contribution (P300,000 P160,000 P23,400) x 10%
Net business income
Capital asset transactions:
Capital gains short-term (P300,000 x 100%)
Capital losses long-term (P400,000 x 50%)
Lotto winning, USA
Gambling winnings

P125,000
232,080
P357,080
P22,917
24,000

46,917
P310,163
P 300,000
( 160,000)
( 23,400)
( 11,660)
P 104,940

P 300,000
200,000
P 200,000

100,000
300,000

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INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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Chapter 11: Income Tax of Individuals

Gambling losses (excess cannot be deducted from other

income)
Gross compensation income (P180,000 + P20,000)
Taxable 13th month pay (P35,000 P30,000)
Net taxable income before exemption
Less: Personal exemptions (P50,000 + P100,000)
Net taxable income

250,000
200,000
5,000
P 709,940
150,000
P 559,940

Tax on P500,000
Tax on excess (P59,940 x 32%)
Total income tax due
Less: Withholding tax on compensation
Income tax still due and payable

P 125,000
19,181
P 144,181
20,000
P 124,181

Problem 11 32
Note: OSD is not applicable unless the taxpayer signified in his ITR that he opted to use OSD
in lieu of itemized deductions. (Sec. 34 (L), NIRC)

Taxpayer is a resident citizen

a. Normal (tabular) tax:
Salaries:
Within (P180,000/90%)
Without ($2,250/90%) x P50
Commissions:
Within (P57,000/ 95%)
Without ($950/ 95%) x P50
Interest income-without
($1,200/80%) x P50
Dividend-without ($1,800/90%) x P50
Totals
Less: Personal exemption basic
Taxable income
Tax on P500,000
Tax on excess (P60,000) x 32%
Total
Less: Tax credits:
Compensation (P200,000 x 10%)
Commission (P60,000 x 5%)
Allowable tax credit - foreign*
Income tax due and payable, after tax credits

Philippines
P200,000

U. S. A.

Total

P125,000

P325,000

50,000
75,000

110,000
75,000

100,000
P350,000

100,000
P610,000
50,000
P560,000

60,000

.
P260,000

P125,000
19,200
P144,200
P20,000
3,000
40,000

63,000
P 81,200

*Allowable tax credit paid outside the Philippines is lower than tax limit or actual tax
paid. The tax credit is computed as follows:
Limit (P350,000/P610,000) x P144,200
Actual foreign taxes paid:
Interest (P75,000 x 20%)
Compensation (P125,000 x 10%)
Dividend (P100,000 x 10%)
Commissions (P50,000 x 5%)
Total

P82,738

Allowable foreign tax credit - lower

P40,000

P15,000
12,500
10,000
2,500
P40,000

Note: The actual tax paid outside the Philippines is lower than the computed tax limit;
hence, the actual tax paid without is the allowable tax credit.

INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

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100

Chapter 11: Income Tax of Individuals

b. Passive income tax:

Interest income within (P50,000/ 80%) x 20%
Dividend income within (P9,000/ 90%) x 10%
Total passive income tax for the year

P12,500
1,000
P13,500

Note: Philippine Lotto winnings are tax-exempt.

Taxpayer is a nonresident citizen

a. Normal (tabular) tax:
Salaries - within (P180,000/90%)
Commissions- within (P57,000/95%)
Net income
Less: Personal exemption - basic
Taxable income
Tax on P140,000
Tax on excess (P70,000) x 25%
Total tax due
Less: Withholding taxes within (P20,000 + P3,000)
Income tax due and payable

P200,000
60,000
P260,000
50,000
P210,000
P22,500
17,500
P40,000
23,000
P17,000

b. Passive income tax:

Interest income within (P50,000/80%) x 20%
Dividend income within (P9,000/90%) x 10%
Total passive income tax for the year

P12,500
1,000
P13,500

Note: Nonresident citizens are taxable only on income derived within the Philippines.

Taxpayer is a resident alien. Solution is the same as nonresident citizen.

Taxpayer is a nonresident alien engaged in trade or business in the Philippines.
The taxpayer cannot be regarded as doing business in the Philippines because he
has no business income in the Philippines.
If the taxpayer has stayed more than 180 days in the Philippines, he is regarded as
doing business. The computation of his net income tax payable in the Philippines
will be the same as in number 2 under the assumption that his country is granting
the same privilege of reciprocity to nonresident Filipino doing business in that
foreign country.
Taxpayer is a nonresident alien not engaged in trade or business in the Philippines.
Nonresident aliens are subject to tax of 25% based on their gross income derived
within the Philippines. In our illustration, let us assume that the source of income
has been deducted with 25% tax on the income given to the taxpayer - that is, the
amount shown in the problem is net of 25% final tax.
The income tax of Mr. Ramsay Colorado would be:
Salaries- within (P180,000/75%)
Commissions- within (P57,000/ 75%)
Interest income within (P50,000/ 75%)
Dividend income within (P9,000/ 75%)
Gross income within

P240,000
76,000
66,667
12,000
P394,667

101

INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS)

SUGGESTED ANSWERS

Chapter 11: Income Tax of Individuals

Multiplied by tax rate

Income tax for the taxable year within

25%
P 98,667

Note: In computing the income tax, a fractional part of a peso less than P0.50 shall be
disregarded. If the fractional part is P0.50 or more, it shall be rounded up to P1.00 (R.A. 590).
Problem 11 33
Gross income from business (P1,000,000 P700,000)
Operating expenses (P250,000 P60,000 P30,000)
Deductible interest expense (P30,000) (P20,000 x 33%)
Deductible contribution (P300,000 P160,000 P23,400) x 10%
Net business income
Capital asset transactions:
Capital gains short-term (P300,000 x 100%)
Capital losses long-term (P400,000 x 50%)
Lotto winning, USA
Gambling winnings
Gambling losses (excess cannot be deducted from other
income)
Gross compensation income (P180,000 + P20,000)
Taxable 13th month pay (P35,000 P30,000)
Net taxable income before exemption
Less: Personal exemptions (P50,000 + P100,000)
Net taxable income
Tax on P500,000
Tax on excess (P59,940 x 32%)
Total income tax due
Less: Withholding tax on compensation
Income tax still due and payable

P 300,000
( 160,000)
( 23,400)
( 11,660)
P 104,940
P 300,000
200,000

100,000
300,000

P 200,000
250,000
200,000
5,000
P 709,940
150,000
P 559,940
P 125,000
19,181
P 144,181
20,000
P 124,181