Income Tax Calculator
BIR withholding tax based on TRAIN Law (effective 2023).
Philippine Income Tax Under the TRAIN Law
The Tax Reform for Acceleration and Inclusion (TRAIN) Law, officially Republic Act No. 10963, significantly overhauled the Philippine income tax system. Effective January 1, 2018, it raised the income tax exemption threshold and restructured the tax brackets. A further reduction took effect on January 1, 2023, making the current tax rates the most taxpayer-friendly in Philippine history.
2023 BIR Income Tax Brackets (Effective January 1, 2023)
| Annual Taxable Income | Tax Rate | Tax Due |
|---|---|---|
| ₱0 – ₱250,000 | 0% | Exempt |
| ₱250,001 – ₱400,000 | 15% | 15% of excess over ₱250,000 |
| ₱400,001 – ₱800,000 | 20% | ₱22,500 + 20% of excess over ₱400,000 |
| ₱800,001 – ₱2,000,000 | 25% | ₱102,500 + 25% of excess over ₱800,000 |
| ₱2,000,001 – ₱8,000,000 | 30% | ₱402,500 + 30% of excess over ₱2,000,000 |
| Over ₱8,000,000 | 35% | ₱2,202,500 + 35% of excess over ₱8,000,000 |
These are progressive (graduated) tax rates — you only pay the higher rate on the portion of income within each bracket, not your entire income.
How BIR Withholding Tax Is Computed
Employers are required to withhold income tax from employee salaries monthly, following the BIR's Withholding Tax on Compensation (WTC) rules. The computation follows these steps:
- Compute Gross Compensation Income (basic salary + allowances + OT pay)
- Subtract mandatory non-taxable deductions: SSS, PhilHealth, Pag-IBIG contributions
- Subtract de minimis benefits within BIR-prescribed limits
- The result is Taxable Compensation Income
- Annualize by multiplying monthly taxable income by 12
- Apply the graduated tax table to compute annual tax
- Divide by 12 to get the monthly withholding tax to deduct
Tax-Exempt Benefits Under TRAIN Law
The following benefits are not subject to income tax for rank-and-file employees:
| Benefit | Tax-Exempt Limit |
|---|---|
| 13th Month Pay and Other Bonuses | Up to ₱90,000 |
| Rice Subsidy | ₱2,000/month or 1 sack of rice |
| Clothing/Uniform Allowance | ₱6,000/year |
| Meal Allowance (overtime) | ₱25/meal or actual OT meal |
| Medical Cash Allowance (dependents) | ₱1,500/semester or ₱250/month |
| Laundry Allowance | ₱300/month |
| Achievement Awards (non-cash) | ₱10,000/year |
| Medical Benefits/Medical Allowance | ₱10,000/year |
Benefits exceeding these limits are added to taxable income. Managerial and supervisory employees follow different "fringe benefit tax" rules for certain perquisites.
Frequently Asked Questions — Philippine Income Tax
Who is exempt from Philippine income tax?
Under the TRAIN Law, employees earning ₱250,000 or less per year (approximately ₱20,833/month) are completely exempt from income tax. This covers the majority of minimum wage earners in most Philippine regions. Additionally, minimum wage earners are fully tax-exempt under a separate provision regardless of their total income, as long as they receive only the statutory minimum wage.
What is the difference between withholding tax and income tax in the Philippines?
Withholding tax is the amount your employer deducts from your monthly salary and remits to BIR on your behalf. Income tax is the actual tax liability you owe the government for a full year. At year-end (or when you file your ITR), if your withheld tax exceeds your actual tax due, you get a refund. If it was withheld too little, you pay the difference. Most rank-and-file employees file BIR Form 2316 (substituted filing) and don't need to file a separate ITR.
Do I still need to file an ITR (Income Tax Return) if my employer withholds tax?
If you have only one employer and your taxes are properly withheld, you qualify for substituted filing — meaning your employer's BIR Form 2316 serves as your ITR. However, you must file a BIR Form 1700 if you: have multiple employers in a year, earn other income (business, freelance, rental), or your employer did not withhold the correct amount. The deadline for annual ITR filing is April 15 of the following year.
How is the 13th month pay taxed in the Philippines?
The 13th month pay is tax-exempt up to ₱90,000 per year. This ₱90,000 cap covers the 13th month pay plus any other bonuses or incentives. If your 13th month pay plus other bonuses exceed ₱90,000, only the excess is added to your taxable income. For most rank-and-file employees earning below ₱250,000 annually, the 13th month pay is effectively always tax-free.
What is BIR Form 2316 and why does my employer give it to me?
BIR Form 2316 is the Certificate of Compensation Payment / Tax Withheld that your employer must issue to you by January 31 of the following year (or within 30 days of resignation). It summarizes your total compensation and withheld taxes for the year. You need this form when: applying for a new job (to show income to new employer), processing bank loans, applying for a visa or travel documents, or filing your annual ITR if required.