How to Compute Individual Income Tax Using the BIR Graduated Tax Table

The BIR’s graduated income tax table, set out in Section 24(A)(2) of the National Internal Revenue Code (NIRC) as amended by the TRAIN Law, has applied since January 1, 2023: the first ₱250,000 of annual taxable income is exempt from tax, and rates rise progressively from 15% to 35% on the excess above that, in six brackets. This table applies to compensation income, business and professional income taxed under the graduated system (rather than the 8% flat option), and any other income not subject to a specific final tax rate. Getting the computation right means applying each bracket’s rate only to the portion of income that falls within it, not the whole amount at the top rate.

The six income tax brackets, effective 2023 onward #

Each bracket in the table applies only to the slice of taxable income that falls within its range — a taxpayer’s entire income isn’t taxed at whatever rate their top bracket reaches, which is the single most common misunderstanding of how graduated tax tables work. The schedule that has applied since January 1, 2023, as reproduced from the BIR-published table:

“Not over ₱250,000 ………. 0%”

The full bracket structure:

The fixed peso amounts in each row (₱22,500, ₱102,500, and so on) already represent the cumulative tax owed on all the brackets below it — that’s what makes the “base amount + percentage of the excess” structure work without recomputing every lower bracket by hand each time.

Who this table applies to #

The graduated table is the default income tax computation for individuals, but it isn’t the only option available to self-employed individuals and professionals, and it doesn’t apply at all to income already subject to a separate final withholding tax. Compensation earners (employees) are taxed under this table automatically, with tax withheld monthly by their employer under the BIR withholding tax table and reconciled annually. Self-employed individuals and professionals with gross sales/receipts not exceeding the VAT threshold can instead elect the flat 8% income tax rate in lieu of the graduated table and percentage tax — see 8% Income Tax Rate vs Graduated Rates: Which Should Self-Employed Professionals Choose? for that comparison. Income already subject to final withholding tax — most dividends, most interest on bank deposits, prizes above ₱10,000 — is excluded from this table entirely, since final tax already settles the liability on that specific income; see Withholding Tax on Prizes and Winnings in the Philippines for one example of that separate category.

Worked example: a mixed income earner #

A taxpayer earning both compensation and freelance income has ₱950,000 in total taxable income for the year after allowable deductions. That amount falls in the “over ₱800,000 but not over ₱2,000,000” bracket. The computation:

1. Base tax for the bracket: ₱102,500.
2. Excess over the ₱800,000 threshold: ₱950,000 − ₱800,000 = ₱150,000.
3. Tax on the excess: 25% × ₱150,000 = ₱37,500.
4. Total tax due: ₱102,500 + ₱37,500 = ₱140,000.

Note that the taxpayer is not taxed at 25% on the full ₱950,000 (which would be ₱237,500) — only the ₱150,000 that falls above the ₱800,000 threshold is taxed at that bracket’s 25% marginal rate. If the same taxpayer had prepaid tax through employer withholding on the compensation portion, or through creditable withholding certificates like BIR Form 2307 on the freelance portion, those amounts are credited against the ₱140,000 computed above — only the remaining balance, if any, is paid when the return is filed.

Summary #

The BIR graduated income tax table under NIRC Section 24(A)(2), unchanged since it took effect January 1, 2023, exempts the first ₱250,000 of annual taxable income and applies progressively higher marginal rates — 15% up to 35% — to income above that in defined brackets. Each bracket’s rate applies only to the income within that slice, not to the entire amount. Self-employed individuals and professionals under the VAT threshold may elect the 8% flat rate instead of this table; employees and most withheld income use it by default, with prior withholding credited against the computed tax due.