BIR Ruling [UN-329-95]

September 12, 1995 BIR RULING [UN-329-95] Ms. Teresita R. Batanes 1139 Tagumpay, Tondo Manila M a d a m : This refers to your letter dated January 21, 1995 stating that you are a retired government employee; that you have rendered at least 43 years of service with the government; that as such, you are already a senior citizen, hence, exempt from the payment of income tax in accordance with section 4 of Republic Act No. 7432; that your only source of income is the gratuity of not more than sixty thousand pesos (P60,000.00) which you have received on December 29, 1994 and deposited in a bank; that the said deposit will earn interest and will form part of your income as retiree. cdt Based on the foregoing, you now request for an exemption from the final tax of 20% to be withheld by the bank under Section 50 (a) in relation to Section 21(c) of the National Internal Revenue Code (NIRC), as amended. In reply, please be informed that Section (2)(h) (i) of Revenue Regulations No. 2-94, provides, thus: "h. Income/Annual Taxable Income of a resident senior citizen shall refer to the annual gross compensation, business and other income received during each taxable year from all sources, as defined in Section 28 of the NIRC which shall not exceed the poverty level of P60,000 or such amount as may thereafter be determined by the NEDA. "However, income derived by a qualified senior citizen from the following sources: "(1) Interest income from Philippine Currency bank deposits, yield and other monetary benefit from deposit substitutes, trust fund and similar arrangements; royalties, prizes and winnings (Section 21 (c), NIRC); "(2) . . . "(3) . . . shall not be included in the determination of his income/annual taxable income, which should not exceed the poverty level of P60,000 or such amount as may thereafter be determined by the NEDA for a certain taxable year, inasmuch as income from such sources shall be subject to the corresponding income tax rates prescribed under Section 21 (c), (d) and (e) of the NIRC, as amended." Such being the case, your interest income from Philippine Currency bank deposits shall be subject to the final withholding tax of 20% prescribed under Section 21(c) (1) of the NIRC, as amended. Your request for tax exemption has to be, as it is hereby, denied. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)