How this instrument works
Republic Act 10963, the TRAIN law, was signed in December 2017 and took effect in January 2018. It wrote two income tax schedules into law at once: a higher, temporary set of rates for 2018 through 2022, and a permanently lower set that stepped in automatically on January 1, 2023 with no expiry date. This instrument uses only that current 2023-onward schedule — six bands running from a 0% floor on the first ₱250,000 up to a 35% top rate on anything above ₱8,000,000.
The zero-rated first band does more than sound generous: it replaced the old system of personal and additional exemptions (₱50,000 for the taxpayer, ₱25,000 per qualified dependent) that applied before 2018. Because each band taxes only the portion of income sitting inside it, a peso earned just above ₱250,000 is taxed at 15%, while a peso earned just above ₱800,000 is taxed at 25% — the running totals in the Tax through bracket fields exist so the size of each step is visible rather than buried inside one final number.
Payroll staff reconciling year-end withholding, salaried employees checking a BIR Form 2316, and freelancers estimating a quarterly 1701Q filing all reach for this kind of schedule. It has real limits worth naming: figures here assume net taxable income already stripped of SSS, PhilHealth, and Pag-IBIG contributions and of exempt items like the first ₱90,000 of 13th-month pay; it excludes the 8% flat-tax option available to many self-employed filers; and it does not apply to a nonresident citizen's income earned abroad, which the Philippines does not tax at all.
- Enter your yearly total in Annual taxable income, PHP — net of mandatory contributions and exempt items, not gross salary before deductions.
- Watch Tax through bracket 2 (up to 400,000) through Tax through bracket 5 (up to 8,000,000) fill in as running totals, one per band boundary.
- Read Income tax payable (2023 TRAIN law rates) for the full year's tax owed under the current schedule.
- Move the income up or down and note which running-total field changes — that band is where the next peso gets taxed at a new rate.
Worked example — ₱600,000 of annual taxable income
Take a salaried filer whose Annual taxable income, PHP reads ₱600,000, already net of SSS, PhilHealth, and Pag-IBIG contributions. The first ₱250,000 is untaxed. The next ₱150,000, up to ₱400,000, sits in the 15% band for ₱22,500 — the exact figure Tax through bracket 2 (up to 400,000) returns. The remaining ₱200,000, from ₱400,000 up to the full ₱600,000, falls inside the 20% band for a further ₱40,000.
Add ₱22,500 and ₱40,000 and Income tax payable (2023 TRAIN law rates) reads ₱62,500 — precisely BIR's own published shortcut for this range, '₱22,500 plus 20% of the excess over ₱400,000,' applied straight to ₱600,000. Because ₱800,000 is never reached, Tax through bracket 4 (up to 2,000,000) and Tax through bracket 5 (up to 8,000,000) both hold flat at that same ₱62,500 — proof the higher bands contributed nothing at this income.
Questions
Why does income up to ₱250,000 owe nothing?
The TRAIN law's first band runs from ₱0 to ₱250,000 at 0%, set close to what a minimum-wage worker earns in a year so low earners are removed from the income tax rolls entirely. It replaced the older system of personal and additional exemptions (₱50,000 plus ₱25,000 per dependent) that applied before 2018 — one wide zero band instead of several separate deductions.
Is this the 2023 schedule, or the higher rates that applied from 2018 to 2022?
This sheet uses the lower, permanent schedule that took effect January 1, 2023 under Republic Act 10963. The law wrote in a temporary, higher set of rates for 2018 through 2022 as a transition, then stepped every band down automatically for 2023 onward with no sunset date. A 2022 computation of the same ₱600,000 income would owe more than the ₱62,500 this instrument returns.
Does this apply to freelancers and self-employed professionals too?
Only if they use the graduated schedule modeled here. A self-employed individual or professional with gross sales or receipts at or below ₱3,000,000 may instead elect an 8% flat tax on gross receipts, replacing both the graduated income tax and the separate percentage tax — often a lower total that this sheet does not compute. Above ₱3,000,000, or without that election, these bands apply.
Does 'annual taxable income' mean my gross salary?
No — enter net taxable income: pay after mandatory SSS, PhilHealth, and Pag-IBIG contributions, and after excluding tax-exempt items such as the first ₱90,000 of 13th-month pay and other de minimis benefits. Running gross salary through these bands directly overstates the tax owed, sometimes by a wide margin for earners near the ₱250,000 exempt floor.
Why does the tax owed rise so fast between ₱400,000 and ₱800,000?
It does not jump — only the rate on income inside that range changes, from 15% to 20%. Each band taxes only the slice of income that falls within it, so a peso earned at ₱410,000 is taxed the same as a peso earned at ₱790,000; pesos beyond ₱800,000 face the next band's 25% rate. Tax through bracket 3 (up to 800,000) shows that slice-by-slice effect directly.
Does this cover income earned by overseas Filipino workers?
No. A nonresident citizen's income earned abroad is exempt from Philippine income tax altogether, so an OFW's foreign salary should never be entered here. Only Philippine-sourced taxable income — from local employment, a local business, or Philippine property — belongs in Annual taxable income, PHP.
References
- Bureau of Internal Revenue (BIR) — Philippines tax authority
- Official Gazette of the Philippines — Republic Acts archive
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.