Computation of 2008 Income Tax Using OSD
Let us now compute the income tax of an i-café owner for the gross sales he had for 2008 using the Optional Standard Deduction (OSD) as provided for under Republic Act No. 9504 and its implementing rules and regulations contained in Revenue Regulations No. 16-2008. To make it simple, let us assume that the taxpayer is a married individual but without any child yet and only one of the spouses is deriving gross income. He is the registered single owner of the i-café business from which he solely derived his gross income.
Let us assume further that the gross income of the i-café owner for the first half of 2008 (January to June) was PhP 150,000.00 and cost of services amounting to PhP 100,000 and another PhP 150,000.00 for the period of July to December 2008. We will now show the computation of taxpayer’s 2008 income tax based on Revenue Regulations No. 16-2008 which provides for the 40% OSD on his July to December gross income and Revenue Regulations No. 10-2008 for the allowed personal exemptions. The OSD for his January to June 2008 gross income will still be 10% only as provided for in the old revenue regulations.
Item > P A R T I C U L A R S > Jan – June 2008 > Jul – Dec 2008 > T O T A L
01 Gross Income P 150,000 P 150,000 P 300,000
02 Cost of Services (100,000) – – o – – (100,000)
03 O. S. D. (5,000) (60,000) (65,000)
03 Net Income 45,000 90,000 135,000
04 Personal Exemption (16,000) (25,000) (41,000)
05 Taxable Income 29,000 65,000 94,000
Therefore, income tax due according to Rates of Tax on Taxable Income of Individuals per Sec. 2 of R.A. No. 9504 will be PhP 8,500 plus 20% of excess over PhP 70,000 or PhP 8,500 + 0.20(94,000 – 70,000) = PhP 13,300.00
We must take note that the 40% Optional Standard Deduction (OSD) was implemented only for the first time and it was imposed only on gross income earned beginning July 2008. Figures will definitely be different in 2009 when the full 40% OSD will be applied to the gross income of the taxpayer for the whole year.
how much ba ang personal exemption for head of the family with one dependent. Yung nakalagay sa 1701 form na personal exemptions, hindi na yun ang sinusunod. Please give the new guidelines for these exemptions. Thank you.
The new personal exemption as provided for by R. A. No. 9504 and R. R. No. 10-2008 is now PhP 50,000 for both single and married individual taxpayer. An additional exemption of PhP 25,000 per child and/or legal dependent is also allowed up to four (4) dependents. These new personal exemptions are effective July 2008 so the old exemptions will still apply to income earned from January to June 2008. You may see these provisions on the links provided in my blog article.
I edited this blog to correct the computation of the income tax by subtracting the cost of services for January to June 2008 gross income in the example. It is allowed to deduct such figure in the old rules when the OSD was still 10%. My apologies to all.
Good day sir!
1st time ko po magfile ng ITR.. Tanong ko lang po ang tungkol sa OSD. nakita ko na po ang sample computation nyo.. Ako po na purely compensation galing ang income, pwede ko po ba gamitin ang OSD? Paano po ang gagawin sa withholding tax? deducted po ba iyon sa taxable income? After na po ng OSD and personal and additonal exemption?
maraming salamat po!
@Kim, persons deriving income purely out of compensation do not need to file income tax return. Your employer should have computed your exact tax and paid it to BIR already. If you need a proof of your income tax payment, ask your employer to give you your copy of BIR Form 2306 (not so sure about this number).