Income Tax Train Law and New Tax Rates 2021

photo with income tax written

As the new year begins, business owners and employees alike must become familiar with the changes in income tax law. The biggest change this year is the implementation of Train Law, which replaces the previous graduated income tax table rates. This article explains what Train Law is, how it affects taxpayers, and provides a new tax table for comparison. Understanding these changes is essential to making sure you’re paying your taxes correctly and avoiding any penalties from the BIR. So read on to learn more about Train Law and how it will impact your taxes this year!

These are the things you should know before filing your income tax this year under TRAIN law 2018. This article will discuss the new income tax rates and other updates regarding individual tax rate train law 2018. Suppose you are a student who is studying taxation. In that case, these things will help you to understand the new personal income tax train law in the Philippines under the RA 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

What is the New Income Tax Rate for Income Tax under Train Law?

Personal and Additional Exemption under Train Law

You might be wondering if you can still avail personal of 50 000 and an additional exemption of 25 000 per dependent up to 4 dependent children (Section 35 of the 1997 Tax Code)? Under this new income tax law, it removed such exemptions and was replaced with the first 25 000 taxable income, which is now subject to zero percent (0%) income tax rate or non-taxable.

Whether you are single, married, or with children, it does not matter with the new income tax rate.

SSS, Phil health, Pag-ibig Still Deductible

There is no change in the mandatory deductions from the gross compensation of a taxpayer. These allowed deductions must be the employee’s share in the GSIS, SSS, PhilHealth and Pag-ibig contributions, and union dues should be limited to compulsory donations.

De minimis Benefits under TRAIN law

Concerning the de minimis benefits, there is no change in the tax treatment.  It is still considered compensation not subject to income tax and, consequently, not subject to fringe benefits tax and withholding tax.

For the updated list of de-minis benefits, click this link: De minimis benefits under the TRAIN law.

Any benefits received from the employer beyond the de minimis benefits rate will be included too as part of the other benefits, subject to the ceiling amount of 90 000. Therefore, any excess beyond the ceiling amount will be taxable and subject to withholding tax on compensation.

Any incentives received from the employer shall form part of the compensation subject to income tax if there is no special law exempt and the nature of the incentives qualify as de minimis benefits.

Premium Health Card Given by the Employer

If the employee (either rank and file or managerial) receives Premium Health Card under group insurance, shall be included as part of the other benefits, subject to 90 000 ceiling thresholds. However, any employee holding managerial/supervisory rank receives other than group insurance will be subject to fringe benefits tax.

Additional Income Under Attrition Law

Any additional income or benefits earned by the employee in any form shall form part of the compensation income subject to withholding tax on compensation. The amount to be included in the taxable compensation should be the fair market value.

Commissions in Addition to the Regular Compensation

Any commission received by the same employer shall be considered a supplementary income or other taxable income. It is part of the regular compensation subject to income tax and to withholding tax using the withholding tax table on balance.

Revised Withholding Tax In the Philippines 2019

withholding tax train law

This tax withheld shall be filled monthly and remitted using BIR Form No. 1601-C. To know your income tax, you may read on how to use the tax calculator.

Wrapping Up

There are many changes made to personal income tax because of this new reform tax law. It decreases the tax rates, and the amount exempted from the individual tax increases from 1o 000 to 250 000. Also, the personal and additional exemptions were removes under train law which is part of the exempted amount.

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