The TRAIN Law provides new personal income tax rates but this table is useful in computing annual income tax. In order to determine the daily/weekly/semi-monthly/monthly withholding taxes on compensation, the BIR has issued RMC 105-2017. Following is an example on how to compute monthly withholding tax:
Sample Monthly rate = Php 40,000
Step 1: Compensation Level (CL) – The Php 40,000 monthly salary will fall under column 3 because it is higher than Php 33,333 but lower than Php 66,667. Hence, we will use column 3 in computing for the withholding taxes.
Step 2: Prescribed Minimum Withholding Tax – The fixed amount under column 3 is Php 2,500. Also, the “+ 25% over CL” means that the excess of Php 40,000 over Php 33,333 will be taxed at 25% which is equal to Php 1,666.75.
Step 3: Total Withholding Tax – Sum up Php 2,500 and Php 1,666.75 and you will get Php 4,166.75.
That’s all! Easy, right?
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