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How To Compute Withholding Tax In Philippines
Not everybody knows how to compute our tax deductions from our monthly salary income. Even myself I didn't know too before. The first time I received my payslip, I was just surprised on the amount that was deducted for withholding tax especially that I was still single that time without no qualified dependents. We should know every peso deducted from our hard-earned salary. So, here in my hub, I simply want to share what I have learned. The examples provided are based on individual earning purely compensation income and individuals engaged in business and practice of profession.
Check out these steps:
First, we should know our monthly taxable income by subtracting the total amount of mandatory contributions (examples: GSIS, PhilHealth, Pag-ibig Fund) from our basic salary.
For instance, a person has a monthly basic salary of P19,077, GSIS premium deduction P1,716.93 (19,077 x 9% ), PhilHealth P237.50, Pag-ibig Fund P100.00.
Second, compute the annual taxable income by multiplying the monthly taxable (answer in step 1) by 12 months.
Then, know your personal tax exemption. Subtract the annual personal exemption from the annual taxable income to get your Annual Net Taxable Income.
Using the Annual Tax Table below, determine which bracket your answer in step 3 belongs to get the annual tax. Then, follow the indicated tax rate.
Lastly, compute your monthly income tax by dividing your answer in step 4 by 12 months. The result is the amount reflected on your payslip.