SELF-PACED LEARNING MODULE

COLLEGE DEPARTMENT

MODULE 4
Subject:

TAXATION

AISAT COLLEGE – DASMARIÑAS, INC.

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 Unit Taxation
Module INCOME TAX
OACC12-TAX Taxation Units: 3 Page |2

INFORMATION SHEET PR-4.1.1

“INCOME TAX”

Income Tax

Definition of income

Income (for tax purposes) means all wealth which flows into the taxpayer other than as a mere return
on capital. So, not all receipts of a person are income.

Definition of income tax

Income taxes refer to a tax on a person's income, profits and the like, realized in one taxable year. It is
imposed at progressive or graduated rates, there being one set of scheduled rates for compensation or
employment income, and for business, professional and other types of non-compensation income.

Nature and purpose of income tax

It is generally regarded as a privilege tax and not a tax on property. It is a tax on privilege to earn an
income. Its purpose is to raise revenue.

Definition of gross income

Gross income is all income but not including exempt income and income subject to final income tax.

Examples of gross income are salaries or wages for services including fees, commissions, and similar
items and those derived from business or profession, sale of and other dealings in property, interests,
rents, dividends, and securities.

All kinds of income of whatever kind and derived from whatever source including those derived from
gambling and illegal transactions are taxable.

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 4th
PRELIM
4 Meeting MS. EMERITA S. MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Taxation
Module INCOME TAX
OACC12-TAX Taxation Units: 3 Page |3

Definition of taxable income

Taxable income is gross income as defined above, less the deductions allowed by law, including in the
case of individuals, the allowable personal and additional exemptions.

Rates of taxable income of individuals

Income subjects to final income tax

Certain incomes are subject to final tax which shall be withheld by the payor and paid by him to the
Bureau of Internal Revenue. They are to be reported by the withholding agent (payor/ employer) and
paid by him to BIR.

Exclusions from gross income

These are incomes that are exempted from tax, e.g., life insurance proceeds paid to beneficiaries upon
the death of the insured as they are considered more as an indemnity rather than as gains or profits,
and payments for injuries or sickness as they are compensatory in nature. Other examples of exempt
income are retirement benefits (under certain conditions) received from private firms, social security
system and GSIS benefits, prizes and awards granted in recognition of religious, charitable, scientific,
educational, artistic literary or civic achievement, or in sports competition.

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 4th
PRELIM
4 Meeting MS. EMERITA S. MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Taxation
Module INCOME TAX
OACC12-TAX Taxation Units: 3 Page |4

Definition of deductions

Deductions are items or amount which the law allows to be deducted from gross income to arrive at the
taxable income.

Amounts of personal and additional exemptions allowable to individuals

For taxable year 2009 and onwards, each individual taxpayer, whether single or married, shall be
allowed a basic personal exemption amounting to fifty thousand pesos (P 50,000.00). In case of married
individuals where only one of the spouses is deriving gross income, only such spouse shall be allowed
the personal exemption.

An individual, whether single or married, shall be allowed an additional exemption of P 25,000.00 for
each qualified dependent child, not exceeding four (4). The additional exemption for each dependent
shall be claimed by the husband, who is deemed the proper claimant unless he explicitly waives his right
in favor of his wife.

Definition and scope of term “head of Family"

A head of family is an individual who actually supports and maintains in one household, one or more
individuals, who are closely connected with him by blood relationship, relationship by marriage, or by
adoption. A head of a family includes an unmarried or legally separated man or woman with:

1. One or both parents, or

2. One or more brothers or sisters, or

3. One or more legitimate, recognized natural, or legally adopted children living with and dependent
upon him or her for their chief support.

The brothers, sister, or children must be (a) not more than 20 years of age, (b) not married, and (c) not
gainfully employed except in the case of children, even if more than 21 years of age, when they are
incapable of self-support because of mental or physical defect. A recognized natural child is one born
outside of wedlock between man and wife, who, at the time of conception of the child, were legally free
to marry each other, and is recognized by one or both parents.

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 4th
PRELIM
4 Meeting MS. EMERITA S. MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Taxation
Module INCOME TAX
OACC12-TAX Taxation Units: 3 Page |5

Computation of individual income tax

The formula for computing the tax for resident citizens may be stated as follows:

Gross income from all sources (within and/or outside the Philippines)

Less: allowable (itemized) deductions or

10% Operational standard deduction (OSD)

= Net income from all sources

Less: Personal and additional exemptions

= Taxable income

Multiplied by: Graduated tax rate in Sec. 24(A) of the Tax Code

= Amount of income tax due and payable

Those whose incomes are derived purely from compensation salaries are not allowed to elect the 10%
OSD

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 4th
PRELIM
4 Meeting MS. EMERITA S. MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Taxation
Module INCOME TAX
OACC12-TAX Taxation Units: 3 Page |6

STUDENT NAME: __________________________________ SECTION: __________________

PERFORMANCE TASK PR-2.1.1

PERFORMANCE TASK TITLE: PROBLEM SOLVING

PERFORMANCE OBJECTIVE: After completing this performance task, you were being knowledgeable in
computing personal income tax
TOOLS AND MATERIALS: Pen and paper

EQUIPMENT: none

ESTIMATED COST: none

PROCESS / PROCEDURE
1. Mr. Juan dela Cruz, single, presently employed at San Miguel Corporation. His annual income is
P400, 000. Compute his taxable income and tax due.
2. Mr. Jose Pedro, married, currently working at Provincial Capitol as Provincial Planning Development
Officer. He has 3 children ages 8, 6, and 4 respectively. He is currently receiving P500, 000 as annual
income. Compute his taxable income and tax due.
3. Mr. Joe Cortez, married with 5 children ages 25, 20, 18, 16, and 14 respectively. He is employed at SM
Baguio as marketing manager. He is currently receiving P600,000 annual income. Help him compute
his taxable income and tax due.
Instructions:
1. You may prepare it either typed written or written report. Write it legibly.
2. Tasks must be neat and presentable. Avoid erasures.

PRECAUTIONS: •Avoid copy and paste performance task of other

ASSESSMENT METHOD: PERFORMANCE TASK CRITERIA CHECKLIST

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 4th
PRELIM
4 Meeting MS. EMERITA S. MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Taxation
Module INCOME TAX
OACC12-TAX Taxation Units: 3 Page |7

STUDENT NAME: _____________________________________ SECTION: ___________

PERFORMANCE TASK CRITERIA CHECKLIST PR-2-1.1

Did I … CRITERIA SCORING
1 2 3 4 5
1. Logic and key points. All corresponding ideas about the topic are
logically presented.
2. Content. Content of the essay flows and is passionate.
3. Cleanliness. Very clean and well presented.
4. Spelling and Grammar. No error in spelling and grammar.
5. Word usage. Word choice and usage are professionals.

GRADES

Teacher’s Remarks □ Quiz □ Recitation □ Project

5 - Excellently Performed
4 - Very Satisfactory Performed
3 - Satisfactory Performed
2 - Fairly Performed
1 - Poorly Performed

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 4th
PRELIM
4 Meeting MS. EMERITA S. MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director