ECONOMICS
INCOME
TAXATION
(2020) Q & A
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INCOME
TAXATION
TABLE OF CONTENTS:
Income Tax
Individuals
Income Tax
Corporation
Income Tax
Capital Assets
Income Tax Individuals
1. (TRAIN) Jun, a minimum wage earner, works for a foundation. He is not engaged in business
nor has any other source of income other than his employment.
In 2019, Jun earned a total compensation income of P135,000. He contributed to the SSS,
Philhealth and HDFM amounting to P5,000 and has received 13th month pay of P11,000.
In 2020, Jun earned, aside from his basic wage, additional pay of P140,000 which consists of
the overtime pay of P80,000, nigh shift differential of P30,000, hazard pay of P15,000 and
holiday pay of P15,000. He contributed to the SSS, Philhealth and HDMF amounting to P5,000
and has received 13th month pay of P11,000.
What is his income tax liability in 2020?
a. 0
b. 1,800
c. 2,200
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d. 2,600
Answer: A
Minimum wage earners shall be exempt from the payment of income tax based on their statutory
minimum wage rates. The holiday pay, overtime pay, night shift differential pay, and hazard pay are
likewise exempt.
Total compensation income P135,000
Add: Overtime, night shift differential, 140,000
hazard
and holiday pay
Total income 275,000
Less: Mandatory contributions 5,00
0
Non-taxable benefits 11,000 16,000
Net taxable income P259,000
Exempt
2. (TRAIN) Jane operates a convenience store while she offers bookkeeping services to her
clients. In 2020, her gross sales amounted to P800,000, in addition to her receipts from
bookkeeping services of P300,000. She already signified her intention to be taxed at 8% income
tax rate in her 1st quarter return.
How much is his tax due
in 2020? a. 68,000
b. 78,000
c. 88,000
d. 98,000
Answer: A
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Gross sales – convenience store P 800,000
Gross receipts – bookkeeping 300,000
Total sales and receipts P1,100,000
Less: Allowable deduction under Section 24 250,000
Taxable income P 850,000
% of P850,000 P 68,000
The total of gross sales and gross receipts is below the VAT threshold of P3,000,000.
Jane’s source of income is purely from the practice of profession thus she is entitled to the allowable
deduction of P250,000 under Section 24 as amended.
The income tax imposed is based on the total of gross sales and
gross receipts. Income tax payment is in lieu of the new
graduated income tax rates.
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3. (TRAIN) Jane operates a convenience store while she offers bookkeeping services to her
clients. In 2020, her gross sales amounted to P800,000, in addition to her receipts from
bookkeeping services of P300,000. She failed to signify her intention to be taxed at 8% income
tax rate on gross sales in her initial Quarterly Income Tax Return, and she incurred cost of sales
and operating expenses amounting to P600,000 and P200,000, respectively, or a total of
P800,000.
How much is his tax due
in 2020? a. 10,000
b. 20,000
c. 25,000
d. 30,000
Answer: A
Gross sales – convenience store P 800,000
Gross receipts – bookkeeping 300,000
Total sales and receipts P1,100,000
Less: Cost of sales 600,000
Gross income 500,000
Less: Operating expenses 200,000
Taxable income 300,000
Tax due on excess (P300,000 – P250,000 x 20%) P10,000
The total of gross sales and gross receipts is below the VAT
threshold of P3,000,000. The income tax imposed is based on
the total of gross sales and gross receipts.
Income tax payment is in lieu of the new graduated income tax rates.
Aside from income tax, Jane is also liable to pay business tax.
INCOME
TAXATION
(2020) Q & A
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TO SCORE A
INCOME
TAXATION
TABLE OF CONTENTS:
Income Tax
Individuals
Income Tax
Corporation
Income Tax
Capital Assets
Income Tax Individuals
1. (TRAIN) Jun, a minimum wage earner, works for a foundation. He is not engaged in business
nor has any other source of income other than his employment.
In 2019, Jun earned a total compensation income of P135,000. He contributed to the SSS,
Philhealth and HDFM amounting to P5,000 and has received 13th month pay of P11,000.
In 2020, Jun earned, aside from his basic wage, additional pay of P140,000 which consists of
the overtime pay of P80,000, nigh shift differential of P30,000, hazard pay of P15,000 and
holiday pay of P15,000. He contributed to the SSS, Philhealth and HDMF amounting to P5,000
and has received 13th month pay of P11,000.
What is his income tax liability in 2020?
a. 0
b. 1,800
c. 2,200
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d. 2,600
Answer: A
Minimum wage earners shall be exempt from the payment of income tax based on their statutory
minimum wage rates. The holiday pay, overtime pay, night shift differential pay, and hazard pay are
likewise exempt.
Total compensation income P135,000
Add: Overtime, night shift differential, 140,000
hazard
and holiday pay
Total income 275,000
Less: Mandatory contributions 5,00
0
Non-taxable benefits 11,000 16,000
Net taxable income P259,000
Exempt
2. (TRAIN) Jane operates a convenience store while she offers bookkeeping services to her
clients. In 2020, her gross sales amounted to P800,000, in addition to her receipts from
bookkeeping services of P300,000. She already signified her intention to be taxed at 8% income
tax rate in her 1st quarter return.
How much is his tax due
in 2020? a. 68,000
b. 78,000
c. 88,000
d. 98,000
Answer: A
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Gross sales – convenience store P 800,000
Gross receipts – bookkeeping 300,000
Total sales and receipts P1,100,000
Less: Allowable deduction under Section 24 250,000
Taxable income P 850,000
% of P850,000 P 68,000
The total of gross sales and gross receipts is below the VAT threshold of P3,000,000.
Jane’s source of income is purely from the practice of profession thus she is entitled to the allowable
deduction of P250,000 under Section 24 as amended.
The income tax imposed is based on the total of gross sales and
gross receipts. Income tax payment is in lieu of the new
graduated income tax rates.
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INCOME
TAXATION
(2020) Q & A
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3. (TRAIN) Jane operates a convenience store while she offers bookkeeping services to her
clients. In 2020, her gross sales amounted to P800,000, in addition to her receipts from
bookkeeping services of P300,000. She failed to signify her intention to be taxed at 8% income
tax rate on gross sales in her initial Quarterly Income Tax Return, and she incurred cost of sales
and operating expenses amounting to P600,000 and P200,000, respectively, or a total of
P800,000.
How much is his tax due
in 2020? a. 10,000
b. 20,000
c. 25,000
d. 30,000
Answer: A
Gross sales – convenience store P 800,000
Gross receipts – bookkeeping 300,000
Total sales and receipts P1,100,000
Less: Cost of sales 600,000
Gross income 500,000
Less: Operating expenses 200,000
Taxable income 300,000
Tax due on excess (P300,000 – P250,000 x 20%) P10,000
The total of gross sales and gross receipts is below the VAT
threshold of P3,000,000. The income tax imposed is based on
the total of gross sales and gross receipts.
Income tax payment is in lieu of the new graduated income tax rates.
Aside from income tax, Jane is also liable to pay business tax.
