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Exclusions from Gross Income Explained

The document outlines various exclusions from gross income as per SEC 32 B of the NIRC, including proceeds from life insurance, returns of insurance premiums, gratuitous transfers such as gifts and inheritances, compensation for injuries or sickness, and benefits from the Social Security System and GSIS. It specifies that while these amounts are excluded from income, any interest earned on life insurance proceeds is taxable. The document emphasizes that these exclusions contribute to an increase in net worth.

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Guiang Barcela
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39 views8 pages

Exclusions from Gross Income Explained

The document outlines various exclusions from gross income as per SEC 32 B of the NIRC, including proceeds from life insurance, returns of insurance premiums, gratuitous transfers such as gifts and inheritances, compensation for injuries or sickness, and benefits from the Social Security System and GSIS. It specifies that while these amounts are excluded from income, any interest earned on life insurance proceeds is taxable. The document emphasizes that these exclusions contribute to an increase in net worth.

Uploaded by

Guiang Barcela
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd

MODULE 2 UNIT 2

EXCLUSION FROM INCOME


GROSS RECEIPTS AND COLLECTIBLES
( Increase in Networth)

NOT INCOME INCOME


SEC 32 B of NIRC:
EXCLUSIONS from GROSS INCOME
1. Life Insurance
A the contract, whereby the insurer in
consideration of a premium undertakes
to pay a certain sum of money either
on the death of the insured or on the
expiry of a fixed period.

EXCLUDED from Income, The proceeds of life insurance


policies paid to the heirs or beneficiaries upon the death of
the insured, whether in a single sum or otherwise, but if
such amounts are held by the insurer under an agreement
to pay interest thereon, the interest payments shall be
included in gross income
EXCLUSIONS from GROSS INCOME

2. Amount Received by
Insured as Return of
Premium

The amount received by the insured, as a return of


premiums paid by him under life insurance,
endowment, or annuity contracts, either during the
term or at the maturity of the term mentioned in the
contract or upon surrender of the contract.

Taxable: Excess
over the total Annual premium paid, P10,000 x 20 yrs = P200,000 Return of capital
periodic premium Return of premium paid 225,000
paid. Taxable Income P 25,000 Return on capital
EXCLUSIONS from GROSS INCOME
Gratuitous Transfers
3 Internal Revenue Tax
Gifts / donations Liability on GRATUITOUS Transfers
Income tax? Transfer tax?

No Yes
Bequests
(Term used for personal property given by will)

 Devise
Real property leave to someone
by the terms of a will.
Income

The value of property acquired by gift, bequest, devise, or descent: Provided,


however, That income from such property, as well as gift, bequest, devise or
descent of income from any property, in cases of transfers of divided interest,
shall be included in gross income.
EXCLUSIONS from GROSS INCOME
4. Compensation for
Injuries or Sickness

Amounts received, through Accident or Health


Insurance or under Workmen's Compensation Acts, as
compensation for personal injuries or sickness, plus
the amounts of any damages received, whether by
suit or agreement, on account of such injuries or
sickness.
EXCLUSIONS from GROSS INCOME

4. Benefits received from or


enjoyed under the Social
Security System in accordance
with the provisions of Republic
Act No. 8282
EXCLUSIONS from GROSS INCOME

5. Benefits received from the GSIS


under Republic Act No. 8291,
including retirement
gratuity received by government
officials and employees.
To summarize, the following are not included as income of the recipient of the
amount:

 Proceeds of life insurance


 Return of periodic insurance premium payments

 gratuitous transfers received: Increase in net WORTH,

 donations
 inheritance

 compensation for injuries/sickness

 SSS/GSIS benefits received


FROM DEFINITION OF INCOME
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