How to Compute Your Withholding Tax

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Darryl Doctor of IM4PINOY has advised me to practice my profession while blogging, and so one inquiry has reached my inbox lately - HOW TO COMPUTE WITHHOLDING TAX AS SEEN ON YOUR PAYSLIP.

Since we're in the Philippines, the discussion I'll be posting here is based on Philippine regulations, and now that is the new law on Withholding Tax or Revenue Regulations 10-2008 (to implement RA 9504).

To start, look at your payslips and determine your Gross Receipts/Income for the payroll period. I believe most of us are paid semi-monthly, so I'll use that as an example.

After locating or computing all your income for the period, look at this shortened table to see in which category your exemption belongs to.

To explain:

If you're single (without dependents, or in other words, children that are dependent on you for support), you should look at row A. This should also be for married women whose exemption for your kids have been claimed by your husband (married without dependents), and for those who are the bread winners who support their parents and for single parents, this is termed as the head of the family.

Next, from STEP 1, you have computed your total earnings/receipts for this period (half month), we can now go and locate which tax rate we are going to use to compute for your withholding tax.

If you are single (from STEP 2) and your gross (or total) earnings for the half-month period is P 7,345.00, you should look at Row A, Column 5. Why? Because P 7,345.00 is more than 5,000 but less than 7,917.

Now that we know where to look, let's go on with the computation.
Row A, Column 5 - please note that the exemption column will no longer be used in the computation because it is already incorporated in the values under each column. So don't mind that, it's just for you to know how much your exemption really is.

Let's proceed. Look at Row A, column 5. The computation will be like this:

P 7, 345 - P 5,000 = P 2,345 multiply by 20% = P 469.00
Add the value right under the column number = 354.17
Total Withholding Tax therefore is = P 823.17

Is the figure correct so far?

Question, how about if you're the husband, you're married and have 2 kids?

According to the tax code, you (husband) are the only spouse allowed to claim the exemption, and therefore, you should look at Row C - Married with 2 dependents. But if you are the wife and you have 2 kids, the husband is still, by default, the rightful claimant of the exemption. Unless, he submits a written affidavit to BIR (through his HR Dept.) that he will not claim the exemption for the dependents/kids, and so you dear wifey, can now look at Row C.

How about Single Parents with 1 child? - look at Row B. You are a head of the family with 1 dependent. And so on and so forth.

For questions and clarifications, feel free to leave a comment below or contact me HERE.


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