Question

Jerome is a resident citizen employed by TW corporation, Inc. He received the following from his employer during 2018:

Basic compensation income P800,000

13th month pay 75,000

Productivity incentive pay 12,000

Christmas bonus 25,000

Uniform allowance 15,000

Actual medical allowance 10,000

Rice subsidy 24,000

compute taxable income?

Answer 1

13th-month pay is usually exempt from any taxes. However, any payments over the one-twelfth denomination of the employee's basic salary are taxable.

Productivity Incentive pay :These are exempt from withholding tax on wages (WTW) or fringe benefits tax (FBT), provided that the combined annual monetary value received from both the CBA and productivity incentive schemes does not exceed P10,000 per employee per taxable year. Regarding personal tax exclusions

Christmas Bonus

According to the IRS, bonuses of money and of gift cards (considered a monetary equivalent) are considered taxable income and must be reported. ... They should be included on your W-2. If your employer has neglected to account for them – you can ask for a corrected W-2 before you file your taxes.

Uniform allowance

One of the allowances which is exempt from tax is what is commonly called Uniform Allowance. Rule 2BB exempts from income tax: any allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.

Actual medical allowance

Medical allowance is a fixed amount paid by some employers to their employees on a monthly basis. If medical allowance is received by the employee, such reimbursement can't be claimed as a deduction from taxable income. Medical allowance shall be fully taxable under the head 'Income from Other Sources' in such cases.

Rice subsidy

An employer who give a monthly rice subsidy to its employees are allowed only P1,500.00 monthly allowance per employee to be considered as deduction as listed above. If the employer granted more than this amount, the excess might be included as taxable compensation income.

Compuatation Of Taxable Income

Basic income = P 800000

Add : Christmas bonus P 25000

Add : Actual Mediacl Allowance P10000

Add : Rice subsidy(1500*12=18000) P6000

Total Income taxable =P841000

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