Computation of the Optional Standard Deduction

July 20, 1960 BIR RULING NO. 327-60 Mr. Francisco Javines P.O. Box 1912 M a n i l a S i r : This is in connection with your letter dated February 29, 1960 addressed to the Secretary of Finance which was referred to this Office for appropriate action. cdt Based on the facts represented in your letter and assuming that Mr. A elects the optional standard deduction, the tax due from him will be P180.00 computed as follows: Gross income P10,000.00 Less Optional Standard deduction P1,000 1,000.00 Net Income P9,000.00 Personal exemption as head of family P3,000 P1,000 exemption for each minor child (2 children) 2,000 5,000.00 Taxable Income P4,000.00 First P2,000 3% 60.00 Second P2,000 6% 120.00 TAX DUE P180.00 ======== However, if the partnership engaged in a tax exempt industry is a duly registered co-partnership, you will be subject only to 1/10 of the tax due on your share in the profit of the tax exempt industry. In the latter case you will have to pay only the amount of P147.60 computed as follows: P8,000.00 x P180 = P144.00 tax on income from salaries and rentals P10,000.00 P2,000.00 x P180 = P36.00 tax on your share of the profit of the new and necessary industry if taxable in full P10,000.00 1/10 of P36.00 = P3.60 tax due on your share in the profit of the new and necessary industry. cdtech P144.00 + 3.60 P147.60 Total tax due Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue