Increasing the Income Tax Exemption Ceiling for Individual Taxpayers

TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES First Regular Session JUL -8 P5:42 SENATE S. No. _ Introduced by Senator Paolo Benigno "Bam" A. Aquino IV AN ACT INCREASING THE INCOME TAX EXEMPTION CEILING FOR INDIVIDUAL TAXPAYERS TO FOUR HUNDRED EIGHTY THOUSAND PESOS (P480,000) ANNUALLY, AMENDING FOR THE PURPOSE SECTION 24(A)(2)(a) and (b) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED EXPLANATORY NOTE The Philippine Constitution mandates that taxation shall be uniform and equitable, and that Congress shall evolve a progressive system of taxation. Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Law, updated the personal income tax brackets in 2017 and set the exemption threshold for individual taxpayers at P250,000 annually. While this adjustment was intended to align tax rates with income levels at the time, the real value of the exemption has since been eroded by inflation. The rising cost of living, driven by increases in food, fuel, utilities, and transportation expenses, has significantly reduced the purchasing power of ordinary Filipino workers. At the same time, wages have not kept pace with these increases. As a result, many low- and middle-income earners now face tax liabilities that strain their already limited take-home pay. This bill seeks to amend the National Internal Revenue Code of 1997, as amended, to increase the personal income tax exemption ceiling from P250,000 to P480,000 annually, or ₽40,000 monthly. This proposed increase aims to restore the real value of the exemption, provide meaningful relief to working individuals, and help

ensure that the tax system remains equitable and responsive to current economic conditions. Raising the exemption threshold will allow workers to retain more of their income, stimulate household consumption, and support inclusive economic growth. This reform reflects the continuing effort to build a more just and progressive system of taxation. In view of the foregoing, the passage of this bill is earnestly sought. Ban quan

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES JUL -8 P5:42 First Regular Session ) SENATE S. No. 267 Introduced by Senator Paolo Benigno "Bam" A. Aquino IV AN ACT INCREASING THE INCOME TAX EXEMPTION CEILING FOR INDIVIDUAL TAXPAYERS TO FOUR HUNDRED EIGHTY THOUSAND PESOS (P480,000) ANNUALLY, AMENDING FOR THE PURPOSE SECTION 24(A)(2)(a) and (b) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Section 24 of the National Internal Revenue Code of 1997, as

amended, is hereby further amended to read as follows: "Sec. 24 Income Tax Rates. - "(A) Rates of Income Tax on Individual Citizen and Individual Resident 5 Alien of the Philippines. - (1) XXX (2) Rates of Tax on Taxable Income of Individuals. - The tax shall be computed in accordance with and at the rates established in the following schedule: L(a) Tax Schedule Effective January 1, 2018 unth December 31, 2022: ..0% Not over P250,000......

Over P250,000 but not over P400,000 20% of the excess over P250,000 Over p400,00 but not over P800,000.. P30,000 | 25% of the excess over P400,000 Over p800,000 but not over p2,000,000 P130,000 / 30% of the excess over P800,000 Over P2,000,000 but not over P8,000,000 P490,000 / 32% of the excess over P2,000,000 Over P8,000,000......... P2,410,000 | 35% of the excess over P8,000,000 (b) Tax Schedule Effective January 1, 2023 and onwards: Not over P250,000.. ..0% Over p250,000 but not over P400,000 15% of the excess over P250,000 Over P400,000 but not over P800,000 P22,500 + 20% of the excess over P400,000 Over P800,000 but not over P2,000,000 P102,500 \ 25% of the excess over P800,000 Over p2,000,000 but not over P8,000,000 P402,500 / 30% of the excess over P2,000,000 Over P8,000,000 ....... P2,202,500 / 35% of the excess over P8,000,000] NOT OVER P480,000. ..0% OVER P480,000 BUT NOT OVER P650,000. 15% OF THE EXCESS OVER P400,000 OVER P650,000 BUT NOT OVER P1,300,000.. P37,500 + 20% OF THE EXCESS OVER P650,000 OVER P1,300,000 BUT NOT OVER P3,200,000..... P167,500 + 25% OF THE EXCESS OVER P1,300,000 OVER P3,200,000 BUT NOT OVER P12,800,000 ... P642,500 + 30% OF THE EXCESS OVER P3,200,00 OVER P12,800,000

P, 3522,500 + 35% OF THE EXCESS OVER P12,800,000 XXX 3 (b) Rate of Tax on Income of Purely Self-employed Individuals and/or Professionals 4 Whose Gross Sales or Gross Receipts and Other Non-operating Income Does Not 5 Exceed the Value-added Tax (VAT) Threshold as Provided in Section 109(BB). - Self- 6 employed individuals and/or professionals shall have the option to avail of an eight 7 percent (8%) tax on gross sales or gross receipts and other non-operating income in 8 excess of [Fwel FOUR hundred [fifty] EIGHTY thousand pesos [(P250,000)] 9 (480,000), in lieu of the graduated income tax rates under Subsection (A)(2)(a) of this Section and the percentage tax under Section 116 of this Code.

Sec. 4. Implementing Rules and Regulations. - Within sixty (60) days from the

effectivity of this Act, the Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate the necessary rules and regulations to implement the provisions of this Act.

Sec. 5. Repealing Clause. - All laws, decrees, orders, rules, and regulations or

parts thereof inconsistent with this Act are hereby repealed or modified accordingly.

Sec. 6. Separability Clause. - If any provision of this Act is declared

unconstitutional or invalid, the remaining provisions not affected thereby shall continue to be in full force and effect.

Sec. 7. Effectivity Clause. - This Act shall take effect fifteen (15) days after its

complete publication in the Official Gazette or in a newspaper of general circulation. Approved,