13’h (CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
1 
FIRST REGULAR SESSION 
1 
SENATE 
i 
I. 
S. BILL NO. 
INTRODUCED BY SENATOR RALPH G. RECTO 
EXPLANATORY NOTE 
This bill seeks to amend Section 32 of Republic No. 8424, otherwise known as the 
‘Wational Internal Revenue Code of 1997 with the purpose of excluding the overtime pay 
from the computation of taxable income to cushion the diminishing purchasing power of 
employees and workers both in the private and public sector thereby increasing their 
disposable income. 
This proposal expunges the mandate of taxation on the economic benefits received by 
employees resulting in more financial potential for the workers. Under this proposed 
measure, “overtime pay” is defined as earnings derived from hours worked in excess of 
the required minimum working hours. 
The amount not to be withheld from the taxable income means financial flexibility - more 
food on the table and children’s education. This measure aims to increase the additional 
monetary benefits from employees’ equitable share in the h i t s  of production. 
Presidential Decree No. 851 as amended by Memorandum Order No.28 grants an 
additional income based on wage but not part of the wage hence, the spirit and full intent 
of the law is, therefore, to mandate an additional and full monetary benefit for the 
workers and employees regardless of their designation or employment status and 
irrespective of the method by which their wages and salaries are paid. 
The proposed legislation will benefit an estimated 32.8 M total labor force from both the 
private and public sector. 
Further, it is the policy of the State to promote a just and dynamic social order that will 
ensue the prosperity and independence of the nation and free 
through policies that provide adequate social services, promote 
standard of living, and an improved quality of life for all. 
Hence, immediate passage of this bill is earnestly sought. 
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isTH CONGRESS OF THE REPUBLIC ) 
OF THE HILIPPINES 
) 
First Regular Se sion 
) 
I 
. .  
S E N A T E  
Introduced by SENATOR RALPH G. RECTO 
AN ACT 
EXCLUDING 
OVERTIME 
PAY 
FROM 
THE 
COMPUTATION 
OF 
COMPENSATION GROSS INCOME THEREBY AMENDING SECTION 32 OF 
REPUBLIC ACT 8424 OTHERWISE KNOWN AS THE NATIONAL INTERNAL 
REVENUE CODE OF 1997 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
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SECTION I. Section 32 of Republic No. 
8424, otherwise known as the 
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“Sec. 32. 
Gross Income. - 
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(A) 
X X X 
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(B) 
Exclusionsfvom gross income. 
The 
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following items shall not be included in gross income and shall be 
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exempt from taxation under this Title: 
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“1. 
x x  x 
“National Internal Revenue Code of 1997,” is hereby amended to read as follows: 
- 
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“2. 
x x x 
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“3. 
x x x 
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“4. 
x x x 
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“5. 
x x x 
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“6. 
x x x  
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“7. 
Miscellaneous items. - 
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a. 
x x x  
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b. 
x x x  
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C. 
x x x  
d. 
x x x  
e. 
x x x  
f. 
x x x  
g. 
x x x  
i. 
OVERTIME 
PAY 
- 
EARNINGS 
DERIVED FROM HOURS WORKED 
IN EXCESS OF THE REQUIRED 
MINIMUM WORKING HOURS. 
SEC. 2. 
Implementing Rules and Regulations. 
~ The Bureau of Internal 
Revenue (BX), Depar ent of Finance (DoF) and the Department of Labor and 
Employment (DOLE), Civil Service Commission (CSC) and other appropriate 
government agencies shall promulgate rules and regulations necessruy for the effective 
implementation of this Act. 
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SEC. 3. 
Repealing Clause. - All other laws, decrees, orders, issuances 
and rules and regulations or parts thereof inconsistent with this Act are hereby amended 
or repealed accordingly. 
SEC. 4. 
SeparabilityClause. - 
The provisions of this Act are hereby 
declared to be separable and, in the event any of such provisions is declared 
unconstitutional, the order provision which is not affected thereby shall remain in full 
force and effect. 
SEC. 5. 
Effectivity. - This Act shall take effect fifteen (15) days after its 
complete publication in at least two (2) newspapers of general circulation. 
Approved, 
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Approved, 
SEC. 5 .  
Effectivity.,- This Act shall take effect fifteen (15) days after its 
complete publication in at least two (2) newspapers of general circulation.