BIR Ruling [DA-333-99]

May 31, 1999 BIR RULING [DA-333-99] Samiwavets Cooperative Campus View, De Leon Street Poblacion, San Miguel Bulacan Attention: Mr . Pat A . Monte Representative Gentlemen : This refers to your letter dated August 22, 1997 requesting for clarification on the following: 1) Whether or not the income tax exemption for senior citizens includes all lawful sources of income; 2) If not, what are not included in the said income tax exemption? In reply, please be informed as follows: 1) Under Section 4 (c) of Republic Act No. 7432, if the annual income of a senior citizen does not exceed P60,000.00, he is exempt from income tax, and consequently, from the withholding taxes prescribed under Revenue Regulations No. 6-82, as last amended by RR 2-98, implementing Secs. 79 and 57 (B) of the Tax Code of 1997. He may invoke this exemption for the subsequent taxable years if his annual income will not exceed P60,000.00. For this purpose, the income or annual taxable income of a resident senior citizen refers to the annual gross compensation, business and other income received during each taxable year from all sources as defined in Sec. 32 of the Tax Code of 1997, which shall not exceed the poverty level of P60,000.00 or such amount as may thereafter be determined by NEDA. 2) Regardless of the amount of taxable income, a senior citizen who derives, income from self-employment, business and practice of profession shall be subject to other internal revenue taxes which include, but are not limited to, the value added tax, caterer's tax, documentary stamp tax, overseas communications tax, excise taxes and other percentage taxes. He shall, therefore, file the corresponding business tax returns in accordance with existing laws, rules and regulations. He shall be subject to the 20% final withholding tax on interest income from currency bank deposit, yield and other monetary benefits from deposit substitutes, trust funds and similar arrangements; royalties, prizes (except prizes amounting to P10,000.00 or less which shall be subject to income tax at the rates prescribed under Sec. 24(A) of the Tax Code of 1997 and winnings (except Philippine Charity Sweepstakes winnings); and the corresponding income tax rates on capital gains from sales of shares of stock (Sec. 24 (C) of the Tax Code of 1997) and capital gains from sales of real property (Sec. 24 (D) of the Tax Code of 1997) in accordance with Sec. 2 (h), RR 2-94. (BIR Ruling No. 173-95 dated October 25, 1995) cdll Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)