October 9, 2012
Can tax deducted from my salary be lowered?
Dear Mrs. Colayco,
How is tax deducted from my salary computed? Is there a way which my tax deduction can be lowered?
Mrs. Colayco replies:
I am not an expert in tax issues and I can only share what I know. Your questions are better directed to the Human Resources (HR) Department of your company.
The tax deduction from salaries is based on an official table provided by the Bureau of Internal Revenue (BIR). Again, your HR should be able to show you this table and explain your category. They have to strictly follow that table under pain of penalty by the BIR.
There are Personal exemptions allowed for each employee. Again, the law mandates the Personal exemptions for each employed person and each dependent depending on his status (single, married etc.).
Your company can add to your non-taxable income through non-taxable allowances acceptable to the BIR. Some of these allowances are:
1.) Employer portion of your contribution to your SSS, Philhealth and Pag-ibig. You may not appreciate this too much because you don't receive the cash but when you retire, you will be grateful. You can check the Social Security System website and Philhealth website for your benefits.
The Pag-ibig website has a very good explanation of their savings program in addition to the housing benefits.
"The Pag-IBIG provident savings program is a fast, easy and affordable way for a member to save for his future needs.
The contributions that a member makes together with the employer counterpart are credited to his Total Accumulated Value (TAV). A member contributing two percent of his monthly compensation doubles his savings immediately with the addition of the employer counterpart contribution. Meanwhile, a member contributing one percent of his monthly compensation triples his savings as the employer counterpart remains at two percent.
Aside from being fully guaranteed by the national government, members' contributions are deducted from the gross income prior to computation of the income tax.
Members' savings earn annual dividends that are also tax-free. The dividend rate varies depending on the net income of the Fund at yearend."
2.) There are also Medical, Clothing, Laundry and Rice allowances that can be given by your company. Up to a certain amount, these are not subject to tax. Again, your HR Department would have a better idea of the amounts allowed. You can mention it to them.
Outside of these allowances, your company will have to be more creative in thinking of additional benefits that will not be taxable. However, perhaps actually lowering the tax deduction will be difficult since they only follow the law.
Mary Anne B. Colayco is a happy wife, fulfilled mother of three beautiful ladies, helpful mother-in-law of two handsome gentlemen, doting grandmother of two adorable girls and the diligent President of Colayco Foundation for Education (CFE). For over 40 years, Mabsi, short for MAB-C, was in executive-level finance-related positions, as well as general management positions in Ayala Corporation subsidiaries (then, Pure Foods and Globe Telecom among others) and also served as a Commissioner of the Energy Regulatory Commission.
She joins her husband, author-entrepreneur Francisco J. Colayco in their common advocacy of teaching financial literacy to income-earning Filipinos. Herword.com draws from Mabsis wealth of life experiences in giving advice on personal money management.
If you have any questions about personal finance, e-mail email@example.com.