Income taxation by valencia chapter 11 (income tax of individuals)

69

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

CHAPTER 11

INCOME TAX OF INDIVIDUALS
Problem 11 – 1 TRUE OR FALSE
1. False – Qualified dependent parents and siblings are not entitled for additional
exemption.
2. False – must be more than 180 days.
3. False – NRA NBT are not allowed for personal exemptions.
4. True
5. True
6. True
7. True
8. True
9. True
10. True
11. False – No personal exemption is allowed to NRANEBT.
12. True
Problem 11 – 2 TRUE OR FALSE
1. False – additional exemptions are allowed only for qualified dependent children.
2. False – not payment for hospitalization but payment of premium for health and
hospitalization insurance provided that the family income does not exceed P250,000
per year.
3. True
4. False – 15% of gross income
5. False – creditable withholding income tax.

6. False – qualified dependent parent and siblings are not entitled for additional
exemption.
7. False – Tax credit of income taxes paid outside the Philippines is allowed only for
resident Filipino citizen.
8. False – The creditable withholding tax is 15%.
9. False – Gross income includes other income but not compensation income.
10. False – Tax-exempt
11. True
12. True
Problem 11 – 3
1. D
2. D
3. A
4. A
5. A
6. B
7. D
8. C
9. C
10. B

Problem 11 – 4
1. D
2. B
3. C
4. A
5. B
6. D
7. B
8. B

9. B
10. A

Problem 11 – 5
1. Not in the choices. P25,000 per child (R.A. 9504)
2. Not in the choices. P50,000 basic (R.A. 9504)
3. B
4. C
5. B
5. B
6. A, B & C
7. D
8. D
9. D
10. C

Problem 11 – 6
A
Income from the Philippines (P10,000 x 12)
Less: Personal exemption – single
Income subject to tax in the Philippines

P120,000
50,000
P 70,000

Note: It is assumed that Juan works as OFW for more than 183 days. Income earned by OFW
outside the Philippines is not subject to tax in the Philippines. The income from the sari-sari
store in the Philippines is earned from January to December of the taxable year.
Problem 11 – 7

C
Gross compensation income – Philippines (P250,000 x 12)
Multiplied by special income tax rate
Income tax payable
Problem 11 – 8
A
Basic personal exemption of couple:
Husband
Wife
Additional exemptions:
4 qualified dependent children (P25,000 x 4)
Maximum amount of personal exemption

P3,000,000
15%
P 450,000

P50,000
50,000
100,000
P200,000


70

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

Problem 11 – 9

C
Only P50,000 basic personal exemption because the taxpayer’s category is single.
Problem 11 – 10
B
Basic personal exemption – Married
Additional exemption
Total personal exemptions

P50,000
25,000
P75,000

Problem 11 – 11
C
Basic personal exemption
Additional exemption (a & b only) (P25,000 x 2)
Total personal and additional exemptions

P50,000
50,000
P100,000

Problem 11 – 12
A
Basic personal exemption – married
P 50,000
Nonresident alien engaged in business in the Philippines is allowed of basic personal
exemption subject to limit, but additional exemption is not allowed. Personal exemptions for
foreigners are subject to the rule of reciprocity with limit of whichever is lower.
Problem 11 – 13

A
P200 per month. For the month of December only.
Problem 11 – 14
D
No special deduction is allowed. The family income exceeding P250,000 is not allowed for a
special deduction for health insurance.
Problem 11 – 15
D
Zero. Maria has no income.
Problem 11 – 16
A
No net tax payable at the end of the taxable year because the senior citizen’s income does
not exceed P60,000 during the year. The tax withheld from interest income is final tax.

Problem 11 – 17
1.

Not in the choices = P790,000 & P160,000
Compensation income
Business and other income:
Professional income (P300,000 + P200,000)
Interest income – without
Dividend income – without
Total net income before personal exemption
Less: Basic personal exemption – single
Net income to ITR – tabular tax

Subject to
Tabular tax
P240,000

500,000
60,000
40,000
P840,000
( 50,000)
P790,000

Interest income within
Dividend income within
Income subject to final tax
2.

A

Compensation income
Business income:
Professional income
Total net income before personal exemption
Less: Basic personal exemption – single
Net income to ITR – tabular tax

Final tax

P100,000
60,000
P160,000
P240,000
300,000
P540,000
50,000

P490,000

Interest income within
Dividend income within
Income subject to final tax

P100,000
60,000
P160,000

Note: The problem is silent as to whether the taxpayer opted for OSD, hence, OSD should
not be deducted from the business gross income. In order to qualify for OSD, the taxpayer
should indicate in his return that he is opting OSD instead of itemized deductions. (Sec. 34
(L), NIRC)
Alternative Solution of Prob. 11-17: If X opted to use OSD
1.

A

Subject to
Tabular tax

Final tax


71

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

Compensation income
Business and other income:
Professional income (P300,000 + P200,000)
Interest income – without
Dividend income – without
Total business and other income
Less: OSD (P600,000 x 40%)
Net business income
Total net income before personal exemption
Less: Basic personal exemption – single
Net income to ITR – tabular tax

P240,000
500,000
60,000
40,000
P600,000
( 240,000)
P360,000
P600,000
( 50,000)
P550,000

Interest income within
Dividend income within
Income subject to final tax
2.

Not in the choices = P370,000 & P160,000

Compensation income
Business income:
Professional income, net of OSD (P300,000 x 60%)
Total net income before personal exemption
Less: Basic personal exemption
Net income to ITR – tabular tax

P100,000
60,000
P160,000
P240,000
180,000
P420,000
50,000
P370,000

Interest income within
Dividend income within
Income subject to final tax
Problem 11 – 18
D
Net taxable income
Income tax
Less: Withholding tax
Net tax payable

P100,000
60,000
P160,000
Husband

P140,000
P 22,500
20,000
P 2,500

Problem 11 – 19
D
Compensation as researcher
Less: Personal exemption – married
Net taxable compensation income

Wife
P250,000
P 50,000
45,000
P 5,000
P 600,000
50,000
P 550,000

Tax on P500,000
Tax on excess (P50,000 x 32%)
Total income tax from compensation
Dividend income tax (P120,000 x 10%)
Interest income tax (P500,000 x 7.5%)
Total income tax due

P125,000
16,000
P141,000

12,000
37,500
P190,500

Problem 11 – 20
D
Capital gains tax on shares of stock (P80,000 x 5%)
Capital gains tax on sale of land (P2,000,000 x 6%)
Total capital gains tax paid

P 4,000
120,000
P124,000

Problem 11 – 21
B
1.
B
Final tax on copyright royalty (P11,250/90%) x 10%
Final tax on mineral claim royalty (P12,000/80%) x 20%
Final tax on share from trading partnership as dividend (P270,000/90%) x
10%
Total final tax
2.

P 1,250
3,000
30,000
P34,250

Not in the choices
None. All reported earnings are subject to final tax.

Problem 11 – 22
B
Percent of service
Add: Output VAT
Total
Less: Withholding tax
Percent of net proceeds
Net proceeds
Divided by percent of net proceeds
Service fee

100%
12%
112%
20%
92%
P 92,000
92%
P100,000


72

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

Withholding tax (P100,000 x 20%)

P 20,000

VAT (P100,000 x 12%)

P 12,000

Problem 11 – 23
1. A
Salaries of assistants
Traveling expenses
Light and water, Office
Stationeries and supplies
Office rent
Total expenses before contribution
Add: Contribution subject to limit (P500,000 – P176,850) x 10%
Total allowable deductions
2.

3.

C
Professional fees
Less: Allowable deductions
Net income from business
Add: Income from compensation:
Allowance as director of Corporation A
Commissions
Net income before personal and additional exemptions

D
Net income before personal and additional exemptions
Less: Personal and additional exemptions:
Basic – widower
Additional exemptions (P25,000 x 3 qualified children)
Net taxable income

P 96,000
11,000
7,890
1,960
60,000
P176,850
32,315
P209,165
P500,000
209,165
P290,835
P25,000
5,000

P320,835
P 50,000
75,000

Tax on P140,000
Tax on excess (P55,835) x 30%
Income tax due
Problem 11 – 24
1. P164,200

Net worth, December 31, 2009
Less: Net worth, December 31, 2008
Unadjusted Net income for year 2009
Add back: Non-deductible expenses
Contributions (P20,000 + P50,000)
Total
Less: Non-taxable income
Income before contribution
Less: Contributions:
Deductible in full
With limit
Actual, P50,000
Limit, P268,000 x 10% = P26,800
Allowed
Net income before personal exemptions
Less: Personal exemptions (P50,000 +p100,000)
Net taxable income
2.

125,000
P195,835
P 22,500
13,959
P 36,459

P375,000
325,000
P 50,000
150,000
70,000

P270,000
2,000
P268,000
P 20,000

26,800

P140,000

Corrected net taxable income
Less: Reported net income subject to tax
Unreported taxable income

Problem 11 – 25
1. Itemized deduction
Compensation income
Gross income from business
Less: Itemized deduction
Total income before personal exemptions
Less: Personal exemptions
Basic personal exemptions
Additional exemptions (P25,000 x 4)
Taxable income

30,000
P320,835

46,800
P221,200
150,000

P 71,200
P 71,200
24,200
P 47,000

P 20,000
P 400,000
150,000
P 50,000
100,000

250,000
P270,000
150,000
P120,000


73

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

Computation of income tax:

Tax on P70,000
Tax on excess (P50,000) x 20%
Income tax before withholding tax
Less: Withholding tax
Income tax due and payable

2.

Optional standard deduction
Compensation income
Gross income from business
Less: Optional standard deduction (40%)
Total income before personal exemptions
Less: Personal exemptions
Basic personal exemptions
Additional exemptions (P8,000 x 4)
Taxable income

P 8,500
10,000
P 18,500
1,000
P 17,500
P 20,000
P 400,000
160,000
P 50,000
100,000

240,000
P260,000
150,000
P110,000

Computation of income tax:

Tax on P70,000
Tax on excess (P40,000 x 20%)
Income tax before withholding tax
Less: Withholding Tax
Income tax due and payable
Problem 11 – 26
2010 net income from business
Capital gains transactions
Short term capital gains (P40,000 x 100%)
Long term capital gains (P30,000 x 50%)
Short term capital loss (P10,000 x 100%)
Capital gains
Less: 2009 Capital loss carry over – limit
Income before personal exemptions
Basic personal exemption- married
Additional exemption (P25,000 x 3)
Taxable income, 2010

P 8,500
8,000
P 16,500
1,000
P 15,500
P 600,000
P 40,000
15,000
(10,000)
P45,000
35,000
P 50,000

75,000

10,000
P 610,000
125,000
P 485,000

Note: The applicable capital loss carry-over should only be limited to P35,000, because it
should not exceed the net income from operation of such year (Sec. 39D, NIRC).
Problem 11 – 27
1.
Compensation income (P240,000 + P30,000)
Less: Personal exemption (P50,000 + P25,000)
Net taxable compensation
Business income
Less: Business expenses
Net loss from business
Net taxable income
2.

P270,000
75,000
P195,000
P100,000
120,000
(P20,000)

Tax on P140,000
Tax on excess (P55,000 x 25%)
Income tax due

Less: Tax credit
Income tax still due and payable

Problem 11 – 28
1.
Salary (P30,000 x 12)
Add: Taxable 13 th month pay (P35,000 – P30,000)
Total
Less: SSS contribution
Medicare/Philhealth contribution
Taxable compensation income before personal
exemption
Less: Personal exemption
Net taxable compensation income
Estimated income tax due:
Tax on P250,000
Tax on excess (P60,000 x 30%)

0 P195,000
P22,500
13,750
P36,250
30,000
P 6,250

P360,000
5,000
P365,000
P3,000
2,000

5,000
P360,000
50,000
P310,000
P50,000
18,000


74

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

Total income tax due per year
Divided by number of months in a year
Monthly withholding tax
2.

P68,000
12
P 5,667

Quarterly business income tax
Business income per quarter
Less: Business expense per quarter
Net income per quarter

P200,000

120,000
P 80,000

Tax on P70,000
Tax on excess (P10,000 x 20%)
Quarterly business income tax first quarter to third quarter
Problem 11 – 29
1.
Entertainment fee (P1,700,000/85%)
Business income
Philippines
Japan
Net income before personal exemption
Less: Personal exemption - basic
Additional (P25,000 x 4)
Net taxable income

P

8,500
2,000
P 10,500
P2,000,000
500,000
1,000,000
P3,500,000
P50,000
100,000

150,000

P3,350,000

Note: The OSD is not used because the problem is silent that the taxpayer opted to utilize it.
OSD is allowed only if the taxpayer indicated in his return that he is using it otherwise he is
using itemized deduction. If the taxpayer did not indicate that he is using OSD and at the
same time he has no itemized deduction, he cannot deduct expenses from his gross business
income. (Sec. 34 (L), NIRC)
2.

Tax on P500,000
Tax on excess (P2,850,000 x 32%)
Income tax due

3.

Tax credit
Creditable withholding tax on fees
(P2,000,000 x 15%)
Business income tax paid - Philippines
Japan (P1,037,000 x 1,000,000/3,500,000))
P296,286 vs. actual P300,000, lower

4.

P 125,000
912,000
P1,037,000

P300,000
40,000

296,286

Income tax still due (P1,037,000 – P636,286))

P 636,286
P 400,714

Alternative Solution of Problem 11-29: If Rosanna Roces opted to use OSD
1.

Entertainment fee (P1,700,000/85%)
Business income
Philippines
Japan
Total gross income
Less: OSD (P3,500,000 x 40%)
Net income before personal exemption
Less: Personal exemption - basic
Additional (P25,000 x 4)
Net taxable income

2.

Tax on P500,000
Tax on excess (P1,450,000 x 32%)
Income tax due

3.

Tax credit

Creditable withholding tax on fees
(P2,000,000 x 15%)
Business income tax paid - Philippines
Japan (P589,000 x 594,000*/2,100,000))
P166,603 vs. actual P300,000, lower

4.

P2,000,000
500,000
1,000,000
P3,500,000
1,400,000
P2,100,000
P50,000
100,000

150,000
P1,950,000
P 125,000
464,000
P 589,000

P300,000
40,000
166,60
3

Income tax still due (P589,000 – P506,603)

P 506,603
P 82,397

Supporting computation of net taxable income before personal exemptions:
Within

Outside

Total


75

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

Gross receipts
Percent

2,500,000
71%

1,000,000
29%

3,500,000
100%

Allocated OSD x percent

Net income before personal exemption

994,000
1,506,000

406,000
594,000

1,400,000
2,100,000

Problem 11 – 30
Gross professional income (P100,000/90%)
Rent income (P300,000/2)
Gross compensation income
Total
Less: Personal exemptions
Net taxable income
Tax on P250,000
Tax on excess:
Mr. Bravo (P86,111 x 30%)
Mrs. Bravo (P150,000 x 30%)
Income tax due
Withholding tax on compensation
Withholding tax on professional income (P111,111 – P100,000)
Income tax still due and payable

Mr. Bravo
P111,111
150,000

225,000
P486,111
150,000
P336,111

Mrs. Bravo

P 50,000

P 50,000

25,833
.
P 75,833
( 25,000)
( 11,111)
P 39,722

45,000
P 95,000
( 50,000)
.
P 45,000

P150,000
300,000
P450,000
50,000
P400,000

Note: No OSD is allowed because the taxpayer did not opt to use it in lieu of itemized
deduction. (Sec. 34 (L), NIRC)
Alternative Solution of Prob. 11-30: If taxpayers opted to use OSD
Mr. Bravo
Gross professional income (P100,000/90%)
P111,111
Rent income (P300,000/2)
150,000
Total gross income
P261,111
Less: OSD (40%)
104,444
Net income from business
P156,667
Add: Gross compensation income
225,000
Total
P381,667
Less: Personal exemptions
150,000
Net taxable income
P231,667
Tax on P140,000/ P250,000
Tax on excess:
Mr. Bravo (P91,667 x 25%)
Mrs. Bravo (P90,000 x 30%)
Income tax due
Withholding tax on compensation
Withholding tax on professional income (P111,111 – P100,000)
Income tax still due and payable

P150,000
P150,000
60,000
P 90,000
300,000
P390,000
50,000
P340,000

P 22,500

P 50,000

22,917
.
P 45,417
( 25,000)
( 11,111)
P 9,306

27,000
P 77,000
( 50,000)
.
P 27,000

Problem 11 – 31
1. P290,000
Compensation income

Taxable 13 th month pay and bonuses (P40,000 – P30,000)
Net business income (P400,000 – P300,000)
Capital gains – long-term (P60,000 x 50%)
Total
Less: Personal exemptions (P50,000 + P100,000)
Net taxable income
2. (P8,000)
Tax on P250,000
Tax on excess (P40,000 x 30%)
Total income tax due
Less: Income tax paid on:
Compensation
Quarterly business income
Income tax refund

Mrs. Bravo

P300,000
10,000
100,000
30,000
P440,000
150,000
P290,000

P
P

50,000
12,000

62,000

(P

70,000
8,000)

P 50,000
20,000


76

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

Problem 11 – 32
Gross income from business (P1,000,000 – P700,000)
Operating expenses (P250,000 – P60,000 – P30,000)
Deductible interest expense (P30,000) – (P20,000 x 12/32)
Deductible contribution (P300,000 – P160,000 – P22,500) x 10%
Net business income
Capital asset transactions:
Capital gains – short-term (P300,000 x 100%)
Capital losses – long-term (P400,000 x 50%)
Lotto winning, USA
Gambling winnings
Gambling losses (excess cannot be deducted from other
income)

Gross compensation income (P180,000 + P20,000)
Taxable 13 th month pay (P35,000 – P30,000)
Net taxable income before exemption
Less: Personal exemptions (P50,000 + P100,000)
Net taxable income

P 300,000
( 160,000)
( 22,500)
( 11,750)
P 105,750
P 300,000
200,000
P 200,000
250,000
200,000
5,000
P 710,750
150,000
P 560,750

Tax on P500,000
Tax on excess (P60,750 x 32%)
Total income tax due
Less: Withholding tax on compensation
Income tax still due and payable
Problem 11 – 33
1.
13 th month pay
Other benefits:

Excess of clothing allowance (P4,500 – P4,000)
Excess of rice subsidy (P1,600 – P1,500) x 12
Total (not exceeding P30,000) – nontaxable
Allowable de minimis:
Clothing allowance
Rice subsidy (P1,500 x 12)
Total 13 th month pay and other benefits
2.

3.

100,000
300,000

P 125,000
19,440
P 144,440
20,000
P 124,440

P25,000
P 500
1,200
P4,000
18,000

Basic salary (P25,000 x 12)
Less: Personal exemptions
Net taxable compensation income

1,700
P26,700
22,000
P48,700
P300,000
150,000
P150,000

Tax on P140,000
Tax on excess (P10,000 x 25%)
Total income tax due

P22,500
2,500
P25,000

Withholding tax from January to November 2009
(P25,000/12) x 11

P22,917

Net taxable compensation income
P150,000
Add: Net business income:
Professional fees (P224,000/1.12)
P 200,000
Gross income from sales (P5,000,000 – P3,200,000)
1,800,000
Less: Itemized deductions:
P2,000,000

Operating expenses, net of interest expense
(P900,000 – P50,000)
P850,000
Interest expense (P50,000 – (P75,000 x
21,500
871,500
38%)
Net income before contribution
P1,128,500
Less: Contribution, actual = P100,000, lower
Contribution, limit (P1,128,500 x 10%)= P112,850
100,000
1,028,500
Net taxable income
P1,178,500
Tax on P500,000
Tax on excess (P678,500 x 32%)
Total income tax due
Less: Tax credits:
WTW from Jan to Nov., 2009
WT on Professional income (P224,000 – P200,000)
Income tax still due and payable on December 31, 2009

P125,000
217,120
P342,120
P22,917
24,000

46,917

P295,203


77

INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

Chapter 11: Income Tax of Individuals

Problem 11 – 34
Note: OSD is not applicable unless the taxpayer signified in his ITR that he opted to use OSD
in lieu of itemized deductions. (Sec. 34 (L), NIRC)

Taxpayer is a resident citizen
a. Normal (tabular) tax:
Salaries:
Within (P180,000/90%)
Without ($2,250/90%) x P50
Commissions:
Within (P57,000/ 95%)
Without ($950/ 95%) x P50
Interest income-without
($1,200/80%) x P50
Dividend-without ($1,800/90%) x P50
Totals
Less: Personal exemption – basic
Taxable income

Philippines
P200,000

Tax on P500,000
Tax on excess (P60,000) x 32%
Total
Less: Tax credits:
Compensation (P200,000 x 10%)
Commission (P60,000 x 5%)
Allowable tax credit - foreign*
Income tax due and payable, after tax credits

U. S. A.

Total

P125,000

P325,000

50,000
75,000

110,000
75,000

100,000
P350,000

100,000
P610,000
50,000

P560,000

60,000

.
P260,000

P125,000
19,200
P144,200
P20,000
3,000
40,000

63,000
P 81,200

*Allowable tax credit paid outside the Philippines is lower than tax limit or actual tax
paid. The tax credit is computed as follows:
Limit (P350,000/P610,000) x P144,200
Actual foreign taxes paid:
Interest (P75,000 x 20%)
Compensation (P125,000 x 10%)
Dividend (P100,000 x 10%)
Commissions (P50,000 x 5%)
Total

P82,738

Allowable foreign tax credit - lower

P40,000

P15,000
12,500
10,000
2,500
P40,000

Note: The actual tax paid outside the Philippines is lower than the computed tax limit;
hence, the actual tax paid without is the allowable tax credit.

b. Passive income tax:
Interest income within (P50,000/ 80%) x 20%
Dividend income within (P9,000/ 90%) x 10%
Total passive income tax for the year

P12,500
1,000
P13,500

Note: Philippine Lotto winnings are tax-exempt.

Taxpayer is a nonresident citizen
a. Normal (tabular) tax:
Salaries - within (P180,000/90%)
Commissions- within (P57,000/ 95%)
Net income
Less: Personal exemption - basic
Taxable income

Tax on P140,000
Tax on excess (P70,000) x 25%
Total tax due
Less: Withholding taxes within (P20,000 + P3,000)
Income tax due and payable

P200,000
60,000
P260,000
50,000
P210,000
P22,500
17,500
P40,000
23,000
P17,000

b. Passive income tax:
Interest income within (P50,000/80%) x 20%
Dividend income within (P9,000/90%) x 10%
Total passive income tax for the year

P12,500
1,000
P13,500


INCOME TAXATION 5TH Edition (BY: VALENCIA & ROXAS)

78

Chapter 11: Income Tax of Individuals

Note: Nonresident citizens are taxable only on income derived within the Philippines.

Taxpayer is a resident alien. Solution is the same as nonresident citizen.
Taxpayer is a nonresident alien engaged in trade or business in the Philippines.
The taxpayer cannot be regarded as doing business in the Philippines because he
has no business income in the Philippines.
If the taxpayer has stayed more than 180 days in the Philippines, he is regarded as
doing business. The computation of his net income tax payable in the Philippines will
be the same as in number 2 under the assumption that his country is granting the
same privilege of reciprocity to nonresident Filipino doing business in that foreign
country.
Taxpayer is a nonresident alien not engaged in trade or business in the Philippines.
Nonresident aliens are subject to tax of 25% based on their gross income derived
within the Philippines. In our illustration, let us assume that the source of income has
been deducted with 25% tax on the income given to the taxpayer - that is, the
amount shown in the problem is net of 25% final tax.
The income tax of Mr. Ramsay Colorado would be:
Salaries- within (P180,000/75%)
Commissions- within (P57,000/ 75%)
Interest income within (P50,000/ 75%)
Dividend income within (P9,000/ 75%)
Gross income within
Multiplied by tax rate
Income tax for the taxable year within

P240,000
76,000

66,667
12,000
P394,667
25%
P 98,667

Note: In computing the income tax, a fractional part of a peso less than P0.50 shall be
disregarded. If the fractional part is P0.50 or more, its shall be rounded up to P1.00 (R.A. 590).