BIR TRAIN Law Guide
Everything Filipino HR teams need to know about TRAIN Law tax brackets, withholding computation, and BIR Form 1601-C filing. TRAIN Phase 2 brackets, effective January 1, 2023, are still the current schedule in 2026. No new income tax law has superseded RA 10963.
What is TRAIN Law?
The Tax Reform for Acceleration and Inclusion (TRAIN) Law, also known as RA 10963, was enacted in December 2017. It restructured the Philippine personal income tax system, lowering rates for most employees and exempting those earning up to ₱250,000/year from income tax entirely.
The TRAIN Law's tax brackets are scheduled in two phases:
- Phase 1 (2018-2022): Initial bracket reductions
- Phase 2 (2023 onwards): Further reductions, current brackets
2024-2025 BIR TRAIN annual tax brackets
| Annual Taxable Income | Tax Rate | Plus Excess Over Lower Bound |
|---|---|---|
| ₱0 – ₱250,000 | 0% | EXEMPT |
| ₱250,001 – ₱400,000 | 15% | 15% × (income − ₱250,000) |
| ₱400,001 – ₱800,000 | 20% | ₱22,500 + 20% × (income − ₱400,000) |
| ₱800,001 – ₱2,000,000 | 25% | ₱102,500 + 25% × (income − ₱800,000) |
| ₱2,000,001 – ₱8,000,000 | 30% | ₱402,500 + 30% × (income − ₱2,000,000) |
| ₱8,000,001+ | 35% | ₱2,202,500 + 35% × (income − ₱8,000,000) |
Withholding tax computation
Employers withhold tax monthly using BIR Revised Withholding Tax Tables (RWTT). The tables annualize monthly income to determine the correct bracket.
Step-by-step computation
- Monthly gross compensation = basic + OT + holiday + premiums (excludes 13th month under ₱90K)
- Less: Statutory deductions = SSS + PhilHealth + Pag-IBIG (employee shares)
- Monthly taxable income = gross − statutory deductions − ₱20,833 (monthly equivalent of ₱250K annual exemption)
- Apply RWTT = use the appropriate withholding bracket
- Round per BIR rules = nearest peso
Example: Employee earning ₱40,000/month
- Gross: ₱40,000
- Less SSS (4.5% × MSC ₱30K = ₱1,350): ₱38,650
- Less PhilHealth (2.5% × ₱40K = ₱1,000): ₱37,650
- Less Pag-IBIG (2% × ceiling ₱5K = ₱100): ₱37,550
- Less monthly exemption (₱20,833.33): ₱16,716.67
- Annual taxable: ₱200,600.04 → falls in 15% bracket
- Annual tax: 15% × (₱200,600 − 0) = ₱30,090
- Monthly withholding: ₱30,090 ÷ 12 = ₱2,507.50
BIR Form 1601-C filing
Form 1601-C is the Monthly Remittance Return of Income Taxes Withheld on Compensation. Filed by the 10th day of the following month via eFPS.
Filing requirements
- Total monthly compensation paid
- Total tax withheld
- Number of employees
- Reconciliation with previous months
eFPS filing: Mandatory for businesses with annual gross sales of ₱30M+. WORKSPHR auto-generates 1601-C in eFPS-ready format.
Penalties: 25% surcharge + 12% interest + ₱1K-25K penalty per RMO 7-2015.
Substituted filing rules
Filipino employees with single employer and pure compensation income are eligible for BIR Substituted Filing per RMC 9-2018:
- No need to file BIR Form 1700 (Individual ITR) personally
- Employer's 1601-C + 2316 (Annual Withholding Statement) replaces individual filing
- Employer must issue Form 2316 by January 31 of following year
Eligibility: Single employer for the year, pure compensation income, total income ≤ taxable bracket limit.
WORKSPHR: Auto-generates Form 2316 in BIR-ready PDF format. Learn more →
Frequently asked questions
Will the TRAIN Law tax rates change in 2026?
Phase 2 brackets are scheduled to remain through 2026 per RA 10963. Any future change would require new legislation. We monitor BIR announcements continuously.Are 13th month pay and bonuses included in withholding tax?
Only the portion above ₱90,000/year is taxable. WORKSPHR auto-handles this, first ₱90K is exempt, excess is added to taxable income.What's the difference between 1601-C and 1601-EQ?
1601-C is monthly compensation withholding. 1601-EQ is quarterly creditable withholding for non-employee compensation (contractors, professionals). Different forms for different income types.What is BIR Form 2316?
Annual Withholding Statement issued to employees by January 31. Shows total income, tax withheld, and other tax-relevant info for the year. Used for substituted filing.How does WORKSPHR handle TRAIN compliance?
Auto-applies brackets, computes withholding monthly, generates 1601-C + 2316 in BIR format. Learn more →