Your gross salary says ₱35,000. Your actual deposit? Somewhere around ₱31,000. The gap stings, and the biggest chunk of it comes from one line item: Withholding Tax on Compensation (WTC).
Here's the tax table your employer uses, followed by the exact computation — step by step, with real math — so you can check your own payslip and spot mistakes before they cost you money.
The 2026 Withholding Tax Table (Monthly)
This is the Revised Withholding Tax Table under the TRAIN Law (Republic Act No. 10963), in effect since January 1, 2023. Find your monthly taxable income — that's your gross salary minus SSS, PhilHealth, and Pag-IBIG contributions — and read across:
| Monthly Taxable Income | Withholding Tax |
|---|---|
| ₱20,833 and below | ₱0 (exempt) |
| ₱20,834 – ₱33,332 | 15% of excess over ₱20,833 |
| ₱33,333 – ₱66,666 | ₱1,875.00 + 20% of excess over ₱33,333 |
| ₱66,667 – ₱166,666 | ₱8,541.80 + 25% of excess over ₱66,667 |
| ₱166,667 – ₱666,666 | ₱33,541.80 + 30% of excess over ₱166,667 |
| ₱666,667 and above | ₱183,541.80 + 35% of excess over ₱666,667 |
Two things to notice before we get to the math:
- Earning ₱20,833/month or less (₱250,000/year)? You pay zero income tax. If your payslip shows withholding tax anyway, something is wrong.
- The rates are marginal. Moving into a higher bracket does not mean your whole salary gets taxed at the higher rate — only the portion above the bracket floor does.
What Is Withholding Tax on Compensation?
The Philippine government doesn't wait until April to collect your income tax. Your employer withholds an estimated amount from every paycheck and sends it straight to the Bureau of Internal Revenue (BIR). That's the pay-as-you-earn system, implemented through Revenue Regulations No. 11-2018 under the TRAIN Law.
Key point: You don't compute or pay this tax yourself. Your employer handles it. But knowing the formula means you can verify the math — and push back when something doesn't add up.
How the Tax Is Computed, Step by Step
Step 1: Determine Your Gross Compensation
Your gross compensation income includes everything you receive for work performed under an employer-employee relationship:
- Basic Salary (monthly, semi-monthly, or daily rate)
- Overtime Pay
- Holiday Pay (in excess of statutory rates)
- Night Shift Differential (in excess of statutory rates)
- Commissions and Bonuses (in excess of ₱90,000 aggregate for the year)
- Taxable Allowances (e.g., representation or transportation allowance not supported by receipts)
What's excluded — these stay out of your taxable gross:
- 13th-month pay and other benefits up to ₱90,000
- De minimis benefits within BIR-prescribed limits
- SSS, PhilHealth, and Pag-IBIG employee contributions (deducted before tax)
Step 2: Subtract Mandatory Contributions
Your employer pulls out mandatory contributions first. These reduce your taxable income because they're non-taxable:
| Contribution | 2026 Employee Share | Basis |
|---|---|---|
| SSS | Varies by bracket (see SSS table) | Monthly salary credit |
| PhilHealth | 2.5% of basic salary (employee share) | Basic monthly salary, capped |
| Pag-IBIG (HDMF) | ₱100 (if salary ≤ ₱1,500) or ₱200 (if salary > ₱1,500) | Fixed rate based on salary bracket |
Formula:
Taxable Compensation = Gross Compensation − (SSS + PhilHealth + Pag-IBIG)
Step 3: Find Your Bracket in the Tax Table
Take the taxable compensation from Step 2 and look it up in the table at the top of this guide. Apply the fixed amount plus the percentage of the excess over your bracket floor.
Step 4: Worked Example
Let's run the numbers for a monthly gross salary of ₱35,000.
Given:
- Gross Monthly Salary: ₱35,000
- SSS Contribution (employee share): ₱800.00
- PhilHealth (employee share, 2.5%): ₱437.50
- Pag-IBIG (employee share): ₱200.00
Computation:
- Total Mandatory Deductions: ₱800 + ₱437.50 + ₱200 = ₱1,437.50
- Taxable Compensation: ₱35,000 − ₱1,437.50 = ₱33,562.50
- Tax Bracket: falls in the ₱33,333 – ₱66,666 row
- Withholding Tax: ₱1,875 + 20% × (₱33,562.50 − ₱33,333) = ₱1,875 + ₱45.90 = ₱1,920.90
Result: The employer deducts ₱1,920.90 as withholding tax from this paycheck.
Want to skip the manual math? Our Income Tax Calculator handles everything — contributions, brackets, the lot — in a few clicks.
Year-End Adjustment (Annualization)
Monthly withholding is only an estimate. The real reckoning happens at year-end (or when you leave the company). Your employer runs an annualization of your total compensation for the calendar year:
- Total all compensation paid during the year.
- Subtract the total mandatory contributions and up to ₱90,000 in tax-exempt benefits.
- Apply the annual graduated tax table.
- Compare the computed annual tax against the total monthly withholding taxes already remitted.
- Refund any overpayment — or collect any shortfall.
The result shows up on your BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld). Your employer must hand this to you on or before January 31st of the following year. Here's how to read your BIR Form 2316 line by line.
Common Payslip Errors to Watch For
Payroll errors are more common than you'd think. Here are the ones that come up again and again:
- Outdated tax tables. Some payroll systems still use pre-TRAIN rates. If your monthly salary is ₱20,833 or below and you see any withholding tax at all, your employer is probably running the wrong table.
- Incorrect contribution brackets. SSS contributions change every year. Check that your deduction matches the latest SSS circular — don't just assume it's right.
- Taxing non-taxable benefits. De minimis benefits (e.g., rice subsidy up to ₱2,000/month, clothing allowance up to ₱6,000/year) should never show up in your taxable compensation. If they do, flag it with HR.
Key Takeaways
- Withholding tax is computed after deducting SSS, PhilHealth, and Pag-IBIG from your gross salary.
- Under the TRAIN Law, employees earning ₱20,833 or less per month (₱250,000/year) are exempt from income tax.
- Monthly withholding is an estimate. Your employer reconciles the actual tax liability at year-end through annualization.
- Always verify your payslip. Use our Tax Calculator as a cross-reference.
Sources
- Bureau of Internal Revenue — Withholding Tax (official withholding tax tables and guidelines)
- Bureau of Internal Revenue — National Internal Revenue Code (Tax Code)
- Republic Act No. 10963 — TRAIN Law, full text (Supreme Court E-Library)
- BIR Revenue Regulations No. 11-2018 (implementing the withholding tax provisions of the TRAIN Law)
