GOVERNMENT workers are expected to get fatter mid-year bonuses starting this month as a result of the enactment of Republic Act 10653 that provides tax exemption on 13th month pay and other benefits not exceeding P82,000.
Senator Juan Edgardo Angara, chairman of the Senate ways and means committee, and author of RA 10653, on Friday said the tax exemption law is applicable to the mid-year bonuses to be given to state workers and military personnel this month.
Malacañang on May 8 issued Budget Circular 2017-2 issued on May 8, paving the way for the release of the mid-year bonuses of government workers, equivalent to one-month basic pay, starting May 15.
“Make no mistake about it. Even the mid-year bonus is covered by this law. That’s why I’m reminding employees who are receiving the mid-year bonus to carefully check your envelops or your ATMs,” Angara said in a statement.
RA 10653, which was signed into law during the Aquino administration, provides that the 13th month pay and other benefits, including productivity incentives and Christmas bonuses not exceeding P82,000 being given to both government and private sector employees, should be tax-free.
Prior to the enactment of RA 10653, tax exemption only covered bonuses not exceeding P30,000.
“We’ve increased the tax exemption cap on bonuses to increase the take-home pay of workers in both government and private sectors,” according to Angara.
The Department of Finance, in its original tax reform package proposal, has sought removal of tax exemption on bonuses, while exempting from income tax those who are earning P250,000 and below a year.
The P250,000 tax-exempt income was supposed to cover the P82,000 13th month pay exemption, the P50,000 personal exemption and the P25,000 deduction for each dependent of taxpayer (maximum of four dependents).
But because of an appeal from lawmakers and other concerned parties, the Finance department revised its proposal and retained the exemption on bonuses.