Accurately calculating employee tax is essential for effective payroll management. This guide will help you understand the process of determining taxable income while ensuring regulatory compliance. Here is the formula used to calculate an employee's taxable income:
Taxable income = (Monthly Basic Pay + Overtime Pay + Holiday Pay + Night Differential) - (SSS/PhilHealth/Pag-IBIG deductions + Tardiness + Absences)
Kindly refer to the tax rate table provided below:
Example:
If an employee has the following income details:
Monthly Salary: ₱50,000
Social Security System (SSS): ₱1,350
PhilHealth: ₱1,125
Pag-IBIG: ₱100
The taxable income is calculated as:
₱50,000 - (₱1,350 + ₱1,125 + ₱100) = ₱47,425
The tax is calculated as:
Income Tax = ₱2,500 + (₱47,425 - ₱33,333) * 25%
Income Tax = ₱2,500 + ₱3,523 = ₱6,023
For ROHQ employees, the tax rate on taxable income is consistently calculated at 15%.
By following this guide, you will learn how to apply this formula step-by-step, enabling you to effectively compute the taxable income for your employees.
- Checklist for Getting Started with Payroll
- What is HDMF or Pag-IBIG contribution?
- What is PhilHealth?
- What is SSS Contribution?
Was this article helpful?
That’s Great!
Thank you for your feedback
Sorry! We couldn't be helpful
Thank you for your feedback
Feedback sent
We appreciate your effort and will try to fix the article