RA 10963 · Explained
How TRAIN Law Tax Brackets Work
The TRAIN Law (Republic Act 10963, the Tax Reform for Acceleration and Inclusion Act) reformed the Philippines' personal income tax system starting January 1, 2018, with a second, more favorable set of brackets taking effect January 1, 2023, and that schedule remains in force for 2026. This guide walks through exactly how the brackets work, shows the official annual and monthly tables side by side, and works through real examples so you can see precisely how your own tax is computed.
What "progressive tax brackets" actually means
A progressive tax system does NOT mean your entire income is taxed at one single rate once you cross a threshold. Only the portion of your income that falls WITHIN each bracket is taxed at that bracket's rate. This is the single most common misunderstanding about the TRAIN Law brackets: crossing into a higher bracket never reduces your take-home pay compared to earning slightly less, because only the incremental amount above each threshold is taxed at the higher rate.
For example, if your annual taxable income is PHP 500,000, you do NOT pay 30% (the rate for the PHP 400,000-800,000 bracket) on the full PHP 500,000. You pay 0% on the first PHP 250,000, 15% on the next PHP 150,000 (250,000 to 400,000), and 20% only on the remaining PHP 100,000 (400,000 to 500,000).
The official annual income tax table (2023 onwards)
This is the annual schedule under Section 24(A) of the National Internal Revenue Code, as amended by the TRAIN Law's second tranche, effective January 1, 2023 and still current for 2026:
| Annual taxable income | Tax due |
|---|---|
| PHP 250,000 and below | 0% |
| Over PHP 250,000 – PHP 400,000 | 15% of the excess over PHP 250,000 |
| Over PHP 400,000 – PHP 800,000 | PHP 22,500 + 20% of the excess over PHP 400,000 |
| Over PHP 800,000 – PHP 2,000,000 | PHP 102,500 + 25% of the excess over PHP 800,000 |
| Over PHP 2,000,000 – PHP 8,000,000 | PHP 402,500 + 30% of the excess over PHP 2,000,000 |
| Over PHP 8,000,000 | PHP 2,202,500 + 35% of the excess over PHP 8,000,000 |
The official monthly withholding tax table
Most employees never see the annual table directly; their employer withholds tax every payroll period using a version scaled to that period. Here is the official MONTHLY table (Annex "E" of Revenue Regulations No. 11-2018), which is what our tax calculator uses:
| Monthly taxable income | Withholding tax |
|---|---|
| PHP 20,833 and below | 0% |
| PHP 20,833 – PHP 33,332 | 0.00 + 15% of the excess over PHP 20,833 |
| PHP 33,333 – PHP 66,666 | PHP 1,875.00 + 20% of the excess over PHP 33,333 |
| PHP 66,667 – PHP 166,666 | PHP 8,541.80 + 25% of the excess over PHP 66,667 |
| PHP 166,667 – PHP 666,666 | PHP 33,541.80 + 30% of the excess over PHP 166,667 |
| PHP 666,667 and above | PHP 183,541.80 + 35% of the excess over PHP 666,667 |
Notice the monthly thresholds are very close to (but not always an exact 1/12 of) the annual ones: PHP 20,833 is PHP 250,000 ÷ 12 rounded down, but the base tax amounts (PHP 8,541.80, PHP 33,541.80, PHP 183,541.80) include small rounding adjustments baked into the official table itself, rather than a plain division of the annual base tax by 12. Some third-party calculators skip this nuance and simply divide the annual table by 12, which can produce a slightly different withholding tax than what actually appears on a real payslip.
Step-by-step: computing tax on PHP 45,000/month
Let's walk through a full example for someone with a monthly taxable income (after SSS/PhilHealth/Pag-IBIG deductions) of PHP 45,000:
- Find the bracket: PHP 45,000 falls in the "PHP 33,333 – PHP 66,666" bracket (base tax PHP 1,875.00, rate 20%, applied over PHP 33,333).
- Compute the excess: PHP 45,000 − PHP 33,333 = PHP 11,667.
- Apply the rate: PHP 11,667 × 20% = PHP 2,333.40.
- Add the base tax: PHP 1,875.00 + PHP 2,333.40 = PHP 4,208.40.
- PHP 4,208.40 is the monthly withholding tax on PHP 45,000 of taxable income.
A brief history: TRAIN Law's two tranches
The TRAIN Law actually introduced two different bracket schedules over time:
- 2018-2022 (first tranche): a slightly less favorable schedule, with a lower PHP 250,000 exemption but higher marginal rates in some brackets, and a top rate of 35% starting at a lower threshold.
- 2023 onwards (second tranche, current): the schedule shown above, with lower marginal rates across most brackets (15% instead of 20% for the first taxable bracket, for example) and the same PHP 250,000 annual exemption. This is the schedule that applies to your 2026 taxable income.
Try it yourself
Rather than compute this by hand every payday, use our tax calculator above to instantly see your SSS, PhilHealth, Pag-IBIG deductions, taxable income, withholding tax, and net take-home pay for any monthly salary. Curious exactly which deductions come out before tax is even applied? See our net pay vs gross pay breakdown. And if you are trying to work out your year-end bonus separately, the 13th month pay calculator applies the PHP 90,000 exemption specifically to that.