Understanding TRAIN Law and Its Effect on Your Salary
1. What Is TRAIN Law?
2. Key Features of TRAIN Law Affecting Salaries
✔ 1. Adjusted Income Tax Brackets
| Taxable Income (PHP) | Tax Rate / Computation |
|---|---|
| Up to ₱250,000 | 0% |
| ₱250,001 – ₱400,000 | 15% of the excess over ₱250,000 |
| ₱400,001 – ₱800,000 | ₱22,500 + 20% of excess over ₱400,000 |
| ₱800,001 – ₱2,000,000 | ₱102,500 + 25% of excess over ₱800,000 |
| ₱2,000,001 – ₱8,000,000 | ₱402,500 + 30% of excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,202,500 + 35% of excess over ₱8,000,000 |
✔ 2. Non-Taxable Benefits
✔ 3. Impact on Withholding Tax
3. How TRAIN Law Affects Your Salary
Scenario Example
Key Takeaways
4. What Employees Should Do
5. How TRAIN Law Helps Financial Planning
The TRAIN Law (Tax Reform for Acceleration and Inclusion), implemented in 2018, has significantly changed how Filipinos pay income tax. Understanding its provisions is essential for employees, freelancers, and business owners who want to maximize take-home pay, plan their finances, and comply with the BIR.
This guide explains what TRAIN Law is, how it affects salaries, and what you should know in 2025.
TRAIN Law (Republic Act 10963) is part of the Philippine government’s tax reform program. Its main goals are:
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Simplify personal income tax rates
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Reduce tax burden for low- and middle-income earners
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Improve efficiency of tax collection
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Generate revenue for infrastructure and social programs
TRAIN Law introduced new tax brackets and changed how deductions and exemptions are applied.
TRAIN Law increased the tax-free income threshold from ₱250,000 to ₱250,000–₱400,000 and simplified progressive taxation:
Employees earning ₱250,000 or less annually now pay no income tax, which increases take-home pay.
TRAIN Law also expanded non-taxable benefits, including:
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13th-month pay and other bonuses (up to ₱90,000)
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De minimis benefits such as rice subsidy, employee uniforms, or health insurance coverage (within prescribed limits)
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Certain allowances for housing, transportation, and medical expenses
These reduce the taxable portion of salary, meaning employees take home more.
Under TRAIN, employers now compute withholding tax based on:
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Updated tax brackets
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Employee status (single, married, dependents)
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Bonuses and taxable allowances
This affects monthly take-home pay, making it higher for low- and middle-income earners.
Suppose your monthly gross salary is ₱30,000:
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Before TRAIN: Withholding tax ~₱2,850 → net pay ₱27,150
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After TRAIN: Withholding tax ~₱1,930 → net pay ₱28,070
You see a noticeable increase in take-home pay, especially for employees earning less than ₱800,000 annually.
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Higher take-home pay for most employees
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Simpler tax computation for employers and payroll staff
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Reduced tax burden on bonuses and benefits
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Encourages transparency in payroll and deductions
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Review Payslips – Ensure payroll correctly applies TRAIN Law brackets.
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Check Non-Taxable Benefits – Verify de minimis benefits and bonuses are not taxed incorrectly.
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Use PH Tax Calculators – Calculate your expected withholding tax to compare with payroll deductions.
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Monitor Annual Income – Helps with budgeting and long-term financial planning.
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Budgeting: Knowing your updated take-home pay makes it easier to plan expenses.
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Savings: Increased disposable income allows for higher savings contribution.
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Loan Planning: Accurate income assessment helps in mortgage, personal loan, and credit card planning.
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Career Decisions: Understanding net salary under TRAIN Law helps evaluate job offers or negotiate raises.