FUNDAMENTALS OF

SENIOR
ACCOUNTANCY, BUSINESS, HIGH
SCHOOL
AND MANAGEMENT 2 (FABM2)
Self-
Procedure in the Computation of Gross Learning
Taxable Income and Tax Due Part I Module
14

Quarter 2
Fundamentals of Accountancy, Business, and Management 2
Quarter 2 – Self-Learning Module 14: Procedure in the Computation of Gross
Taxable Income and Tax Due Part I
First Edition, 2020

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 FABM2
SENIOR
HIGH
SCHOOL

Self-
Learning
Module
14

Quarter 2
Procedures in the Computation of
Gross Taxable Income and
Tax Due Part I
Introductory Message

For the facilitator:

Welcome to the Fundamentals of Accountancy, Business, and Management2

Grade 12 Self-Learning Module on Procedure in the Computation of Gross Taxable
Income and Tax Due Part I.

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st-century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character while taking into
consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator, you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them to
manage their learning. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.
 For the learner:

Welcome to the Fundamentals of Accountancy, Business, and Management 2

Self-Learning Module on Procedure in the Computation of Gross Taxable Income and
Tax Due Part I.

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an active
learner.

This module has the following parts and corresponding icons:

Expectations - These point to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities – These are sets of activities that you need to

perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this self-learning module, you are expected to:
1. explain the procedure in the computation of gross taxable income and tax
due;
2. compute for a gross taxable income of compensation earner; and
3. compute for a tax due of compensation earner.

PRETEST

Directions: Multiple Choice. Choose the correct answer by writing the letter of your
answer before the number.

1. What is the formula used in computing taxable income for the

compensation earners?
A. Gross Income less Non-Taxable Income/benefits
B. Gross Income less Taxable/benefits
C. Net Income less Non-Taxable Income/benefits
D. Net Income less Taxable/benefits
2. Which of the following is NOT part of mandatory contributions?
A. Social Security System (SSS) for private employee/Government Service
Insurance System (GSIS) for government employee
B. Pag-Ibig Fund
C. PhilHealth (PHIC)
D. Taxes
3. Which of the following best describes the Statutory Minimum Wage?
A. The highest wage rate fixed by law that an employer can pay his workers.
B. The lowest wage rate fixed by law that an employer can pay his workers.
C. The average rate fixed by law that an employer can pay his workers.
D. All of the above
4. How much is the taxable income of Mr. Mario if he earns P250,000.00 a year
and has total mandatory contributions of P5,500.00?
A. P245,500.00 B. P245,000.00 C. P244,000.00 D. P244,500.00
5. How much the is total tax due of Mr. Mario?
A. 0 B. P25,000.00 C. P50,000.00.00 D. P75,000.00
 RECAP
Directions: Identification. Read and identify each sentence by writing your answers
on the space provided.
Business Taxation Process Business Taxation
Minimum Wage Earners BIR Form No. 1700
BIR Form No. 1701 BIR Form No. 2316

1. It is the method of how businesses file their ITR (Income Tax Return).
2. This refers to the taxes each business pays to the government.
3. An Annual Income Tax Return filed by Individuals Earning Purely from
Compensation Income.
4. An Annual Income Tax Return filed by Individuals, including those Mixed
Income Earners, Estates and Trust.
5. This refers to Certificate of Compensation Payment/Tax Withheld for
compensation with or without Tax Withheld.

LESSON

It was introduced in the previous module some of the BIR Forms that is needed
to be file by taxpayers, either compensation income earner, sole proprietorship, and
mixed earners.

This module focuses on the computation of Gross Taxable Income and Tax
due of Compensation Income Earner.

Are you familiar with the TRAIN Law or “The Tax Reform of Acceleration and
Inclusion Law?” How Gross Taxable Income and Tax due are computed under this
Law?

What is TRAIN Law? According to Dir. Trinidad A. Rodriguez of National Tax

Research Center, TRAIN aims to make the Philippine Tax System simpler, fairer, and
more efficient to promote investments, create jobs, and reduce poverty.

Under this law, the BIR issued a Revenue Regulation No. 8-2018 for the public
to know how taxes are to be computed.

The basis of discussion of this module is the Revenue Regulations (R.R.) No.
8-2018.

Under Section 3 of R.R. 8-2018. Individual Citizen and Individual Resident

Alien of the Philippines, in general, the income tax on individual’s taxable income
shall be computed based on the following schedules under Sec. 24(A)(2)(a) of the Tax
Code, as amended.

Each individual who earns from his/her compensation shall be taxed as

prescribed under Section A RR 8-2018 which the table shows.

Figure 1

Remember that taxable income for compensation earners is the Gross Income
less Non-Taxable Income/benefits, and these are but not limited to 13th-month
pay, and other benefits (subject to limitations), de minimis (are benefits of small value
provided by the employer to his employees on top of their basic compensation),
benefit’s, and employee’s share in the SSS, GSIS, PHIC (PhilHealth), Pag-ibig
contributions, and union dues. Contribution in SSS, PHIC, Pag-ibig are mandatory.

Minimum wage earners are exempted from the payment of income tax based
on their statutory minimum wage rates.

According to the Department of Labor and Employment’s Rules Implementing

Republic Act No. 6727, item o, Statutory Minimum Wage is the lowest wage rate fixed
by law that an employer can pay his workers.

Illustrative Problem No. 1

Jasmine Guzman works in a grocery store. Her means of income is purely
from her compensation. In 2018, she earned a total compensation of P185,000.00.
Her total mandatory contribution is P7,440.00 and received a 13th-month pay of
P15,416.67. How much is the taxable income and Tax Due of Ms. Guzman?
The table shows how Gross Taxable Income and Tax Due are computed.

Total Compensation Income P185,000.00

Less:
Mandatory contributions P7,440.00
Non-taxable benefits 15,416.67 22,856.67
Gross Taxable Income P162,143.33
Total Tax Due Exempted
Table 1
 Based on the computation of Ms. Guzman’s taxable income, does she need to
pay her tax? Ms. Guzman’s earnings are tax exempt because based on the income
tax rate, refer to figure 1, a taxpayer who earns P250,000.00 and below is exempted
from paying of taxes.

Illustrative Problem No. 2

Iane Placido, a BPO personnel, received P350,000.00 as his basic wage for
year 2019. Aside from his salary the company paid him P117,000.00 which consists
of his overtime pay, P70,000.00, night differential P35,000.00, and holiday pay of
P12,000.00. His mandatory contributions have a total of P14,000.00, and his non-
taxable benefits are P20,833.33. How much is the taxable income and Tax Due of
Mr. Placido?

The table shows how Taxable Income and Tax Due of Mr. Placido are computed.

Total Compensation Income P350,000.00

Add:
Overtime pay 70,000.00
Night differential 35,000.00
Holiday pay 12,000.00
Total Income 117,000.00
Less:
Mandatory contributions P14,000.00
Non-taxable benefits 20,833.33 34,833.33
Gross Taxable Income P432,166.67
Total Tax Due = (P432,166.67 –
P400,000.00) x 25% + P30,000.00 P38,041.67
Table 2

Is Mr. Placido exempted from withholding tax? Mr. Placido is NOT exempted
because his basic salary is higher than P250,000.00.
Total Tax Due is the amount of money a taxpayer need to pay to the
government from his earnings.

ACTIVITIES

Activity No. 1. Problem Solving

Directions: 1. Compute for the gross taxable income and tax due of Ms. Myra dela
Torre, supervisor of the telecommunication company. Basic salary of P1,401,148.83,
13th-month pay, and other benefits P90,000.00, de minimis benefits of P40,000.00,
SSS/GSIS/, PHIC, and Pag-ibig contributions P16,570.60.
2. Explain the procedure of how you computed the gross taxable income and tax due
of Ms. dela Torre.

Activity No. 2 Discovery.

Directions:

1. Prepare and compute for the gross taxable income and tax due of one of your
employees. Refer to the proposed salary and compensation of your employees from
FS of your proposed business in your Entrepreneurship subject.

2. Explain the procedure on how you compute the gross taxable income and tax due
of your employee.
 WRAP-UP

Let us summarize.

1. What is TRAIN Law?

2. When did the TRAIN Law take effect?
3. What are the bases of computing the Gross Taxable Income and Tax Due?
4. What are the mandatory contributions the income earner needs to pay?
5. What is a Statutory Minimum Wage?

VALUING

Give and explain three (3) reasons why is it important for an employee to be
knowledgeable of how his/her tax is computed.
 POSTTEST

Problem Solving. For 5 points.

One of the accounting staff of RYZ Co. where Mr. Yulo is currently working is
preparing Mr. Yulo’s Certificate of Compensation Payment/Tax Withheld or the BIR
Form No. 2316 for year 2019. Based on the payroll, Mr. Yulo received his 13th month
pay and other benefits amounting to P90,000.00, de minis benefits of P30,054.00,
and a P16,575.60 total of his mandatory contribution. Mr. Yulo’s basic salary is
P1,301,149.43 and received another 13th-month pay and other benefits of
P115,151.40 which are taxable.

Directions: Compute for Total Non-Taxable Compensation Income, Total Taxable

Compensation Income, Net Taxable Compensation Income, and Tax Due of Mr. Yulo.

Show how to compute for Total Non-Taxable Compensation Income, Total

Taxable Compensation Income, Net Taxable Compensation Income, and Tax Due.
 MWF.pdf
https://nwpc.dole.gov.ph/wp-content/uploads/2018/12/IRR-on-RA-6727-
https://www.pwc.com/ph/en/publications/pdf/pwcph-tax-code-2019.pdf
philippines/
https://taxacctgcenter.ph/tax-exempt-de-minimis-benefits-train-ra-10963-
%20RR%202018/RR%20No.%208-2018.pdf
https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text
know.pdf
http://www.ntrc.gov.ph/images/Publications/train/tax-changes-you-need-to-
WEB
References
PRETEST
1. A
2. D
3. B
4. D
5. A
RECAP
1. Business Taxation Process
2. Business Taxation
3. BIR Form No. 1700
4. BIR Form No. 1701
5. BIR Form No. 2316
POSTTEST
13th month pay/other benefits 90,000.00
de minis benefits 30,054.40
mandatory contributions 16,575.60
Total Non-Taxable/Exempt
Compensation Income 136,630.00
basic salary 1,301,149.43
3th month 115,151.40
Total Taxable Compensation
Income 1,416,300.83
Gross Compensation Income 1,552,930.83
Total Non-Taxable/Exempt
Compensation Income 136,630.00
Net Total Taxable
Compensation Income 1,416,300.83
Total Tax Due =
(1,416,300.83 - 800,000.00)
*.30 + 130,000.00 314,890.25
KEY TO CORRECTION