INCOME TAX

INCOME- means the gain derived from capital, from labor, or from both combined, including profit gained from dealings in property or as well as any asset clearly realized as in weather earned or not.EXAMPLE: bonuses, awards, and prizes.INCOME TAX- is the tax on the net income or the entire income received or realized in one taxable year. It is levied upon taxable corporate and individual incomes in excess of specified amounts less certain deductions and exemptions permitted by law.FUNCTIONS OF INCOME TAX1. Provide large amounts of revenues.2. To offset regressive sales and consumption taxes and together with estate tax.3. To mitigate the evils arising from the inequalities in the distribution of income and wealth which are considered deterrent to social progress by a progressive scheme of taxation.NATURE AND PURPOSE OF TAXATION1. It is regarded as an excise tax, and not a tax a tax on persons, properties and profits. It is really on the right to earn income by an individual or entity on governmental needs. 2. It is self-assessing or self computed.3. It is imposed primarily to raise revenue.CLASSIFICATION OF TAX PAYERS1. INDIVIDUALS(a) Citizens 1.) Resident citizens2.) Non-resident citizens(b) ALIENS1.) Resident aliens2.) Non-resident aliensa.) Those engaged in trade or business within the Philippines.b.) Those who are not so engaged.2. CORPORATION(a.) Domestic(b.) Foreign1.) Resident2.) Non-resident3. General Partnership(a) General professional partnership(b) General co-partnership4. ESTATES AND TRUSTSRATES OF INDIVIDUAL INCOME TAXES1. The individual income tax payable by citizens, residents, and resident aliens is imposed at progressive or graduated rates. The theory is that a persons ability to shoulder the tax burden more rapidly as his income becomes higher and higher. Only resident citizens (and domestic corporations) are taxed according to incomes derived from abroad. 2. Tax is imposed upon taxable compensation or employment income, business income, and income derived from the practice of profession by citizens or resident aliens ranging from 5% on the first P10, 000 up to a maximum of 32% on the excess of P50, 000.3. The tax shall be computed in accordance and that at the rates established in the following schedules:NOT OVER 10,000----------- 5%OVER 10,000 but NOT OVER 30,000-------------P500+10% of the excess over 10,000OVER 30,000 but NOT OVER 70,000-------------P2500+15% of the excess over 30,000OVER 70,000 but not OVER 140,000-------------P8500 +20,000 of the excess over 70,000OVER 140,000 but not OVER 250,000-----------P22, 500+25% of the excess over 140,000OVER 250,000 but not OVER 500,000-----------P 50,000+30% of the excess over 250,000OVER 500-----------------------------------------------P 125,000+32%of the excess over 500,000

IF THE TAXABLE INCOME IS 150,000 the income tax due is 25,000 computed as follows: P22, 500------------------------for 140,000 P 2,500------------------------for 10,000 (25% of the excess) ___________ _______________________ P 25,000 P 150,000NOTE:1. MARRIED INDIVIDUALS should compute for their taxable income separately. If any income cannot be definitely attributed, or identified as income exclusively earned by either spouses, the same will be divided equally between them for the purpose of determining their taxable income.2. MINIMUM WAGE EARNER should be exempted from income taxation . Holiday, night shift and overtime payment should also be exempted from taxation.3. A RESIDENT ALIEN OR INDIVIDUALS ENGAGED IN TRADE AND BUSINESSES WITHIN THE PHILIPPINES is subject from the income tax for profit gained from sources in the Philippines.4. NON-RESIDENT ALIEN should pay 5% of the entire gross income and 15% of the gross income received as compensation, salaries, etc. as accumulated from the sources within the Philippines.5. CERTAIN PASSIVE INCOMES subject to a separate and final income tax imposed at fix rates.