ORDINARY INCOME
The tax base on the income of RC, NRC, RA and NRAETB is the TAXABLE INCOME. Taxable income under Section 31 of the Tax Code means the pertinent items of gross income specified in this Code, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income by this Code or other special laws. From the definition itself, the formula therefore is:
Gross Income (Section 32 A - Items 1-11) Php xxx,xxx.xx
Less: Itemized Deductions (Section 34 A-J) or Optional Standard Deductions (Section 34 L) xxx,xxx.xx
Taxable Income Php xxx,xxx.xx
Under Section 32 (A), Except when otherwise provided in this Title, gross income means all income derived from WHATEVER SOURCE, including, but not limited to the following items:
(1) Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions, and similar items;
(2) Gross income derived from the conduct of trade or business or the exercise of a profession;
(3) Gains derived from dealings in property;
(4) Interests;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Annuities;
(9) Prizes and winnings;
(10) Pensions; and
(11) Partner's distributive share from the net income of the general professional partnership.
Thus, the pertinent items of gross income when earned by an RC (within and without), NRC (within), RA (within), NRAETB (within) shall be reported and shall form part of their income. Please take note that Tax Code did not distinguish the source of the income. The definition did simply provide for WHATEVER SOURCE. So this means that the income even proceeding from illegal sources like illegal gambling, bribes, kickbacks is still taxable and needs to be reported in the Income Tax Return.
Under Section 34 (A-J), the Itemized Deductions are:
(1) Expenses (salaries/wages/fringe benefits; travel expenses; rent and utilities; entertainment, amusement and recreation);
(2) Interest;
(3) Taxes;
(4) Losses;
(5) Bad debts;
(6) Depreciation;
(7) Depletion;
(8) Charitable and Other Contribution;
(9) Research and Development;
(10) Pension Trust.
Section 34 (L) provides for the Optional Standard Deduction (OSD):
- not exceeding 40% of gross sales/receipts for individual taxpayers
- not exceeding 40% of gross income for corporate taxpayers
PASSIVE INCOME
(1) Interest, Royalties, Prizes and Other Winnings -
(2) Cash and/or Property Dividends -
(3) Capital Gains from Sale of Shares of Stock Not Traded in the Stock Exchange -
(4) Capital Gains from Sale of Real Property
The tax base on the income of RC, NRC, RA and NRAETB is the TAXABLE INCOME. Taxable income under Section 31 of the Tax Code means the pertinent items of gross income specified in this Code, less the deductions and/or personal and additional exemptions, if any, authorized for such types of income by this Code or other special laws. From the definition itself, the formula therefore is:
Gross Income (Section 32 A - Items 1-11) Php xxx,xxx.xx
Less: Itemized Deductions (Section 34 A-J) or Optional Standard Deductions (Section 34 L) xxx,xxx.xx
Taxable Income Php xxx,xxx.xx
Under Section 32 (A), Except when otherwise provided in this Title, gross income means all income derived from WHATEVER SOURCE, including, but not limited to the following items:
(1) Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions, and similar items;
(2) Gross income derived from the conduct of trade or business or the exercise of a profession;
(3) Gains derived from dealings in property;
(4) Interests;
(5) Rents;
(6) Royalties;
(7) Dividends;
(8) Annuities;
(9) Prizes and winnings;
(10) Pensions; and
(11) Partner's distributive share from the net income of the general professional partnership.
Thus, the pertinent items of gross income when earned by an RC (within and without), NRC (within), RA (within), NRAETB (within) shall be reported and shall form part of their income. Please take note that Tax Code did not distinguish the source of the income. The definition did simply provide for WHATEVER SOURCE. So this means that the income even proceeding from illegal sources like illegal gambling, bribes, kickbacks is still taxable and needs to be reported in the Income Tax Return.
Under Section 34 (A-J), the Itemized Deductions are:
(1) Expenses (salaries/wages/fringe benefits; travel expenses; rent and utilities; entertainment, amusement and recreation);
(2) Interest;
(3) Taxes;
(4) Losses;
(5) Bad debts;
(6) Depreciation;
(7) Depletion;
(8) Charitable and Other Contribution;
(9) Research and Development;
(10) Pension Trust.
Section 34 (L) provides for the Optional Standard Deduction (OSD):
- not exceeding 40% of gross sales/receipts for individual taxpayers
- not exceeding 40% of gross income for corporate taxpayers
PASSIVE INCOME
(1) Interest, Royalties, Prizes and Other Winnings -
(2) Cash and/or Property Dividends -
(3) Capital Gains from Sale of Shares of Stock Not Traded in the Stock Exchange -
(4) Capital Gains from Sale of Real Property