To manage your money and make plans for the future, you should know your annual gross income regularly.
Your gross income is how much money you earn throughout a fiscal year before any deductions are made. Your total income includes all your total earnings, not just your salary. For instance, salaries, wages, pensions, overtime pay, commissions, investment income, retirement funds, etc., can all be included in the gross income.
You can always compute your gross income using a few simple calculations. This article will explore the meaning of gross annual income and demonstrate how to calculate it for your specific circumstances.
Gross income in your salary pay slip
Gross income on a pay slip refers to the total amount an employee earns before any deductions or taxes are subtracted. It includes all forms of compensation, such as regular wages and any additional earnings like overtime pay.
As such, gross income provides a clear picture of an employee’s earnings without factoring in any withholdings. It serves as the starting point for calculating the net income, which is the amount an employee actually takes home after deductions for taxes, benefits, and other deductions have been applied.
Below is an example of a pay slip with gross and net income representations. Note that the values here are mere examples and do not reflect the actual deductions for this salary bracket.
| Pay Slip Employee: Juan Dela Cruz Employee ID: 67890 Pay Period: August 1, 2023 – August 15, 2023 | |||
| Description | Rate | Hours | Amount |
|---|---|---|---|
| Regular Hours Worked | ₱400.00 | 80.00 | ₱32000.00 |
| Overtime Hours | ₱600.00 | 10.00 | ₱6000.00 |
| Total Earnings: | ₱38000.00 | ||
| Description | Amount | ||
| Income Tax | ₱1500.00 | ||
| SSS Contribution | ₱350.00 | ||
| PhilHealth | ₱200.00 | ||
| Pag-IBIG Contribution | ₱100.00 | ||
| Total Deductions: | ₱2150.00 | ||
| Gross Income: | ₱38000.00 | ||
| Net Income (after deductions): | ₱35850.00 | ||
To calculate the annual gross income, you need to multiply the total gross income from the pay slip by the number of pay periods in a year. Let’s assume there are 24 pay periods in a year (bi-monthly pay).
From the pay slip example provided:
Total Earnings: ₱38,000.00 (per pay period)
Annual Gross Income: ₱38,000.00 x 24 = ₱912,000.00
So, the annual gross income would be ₱912,000.00.
How to calculate personal and business gross income?
Unlike your salary’s gross income, your overall personal income would be computed differently. Moreover, your personal net income may include deductions from your daily expenses.
Generally, the computation for your personal gross and net income would look like this:
Personal Gross Income = Salary + Rental Income + Dividends + Interest Earned + Other Sources
If you are a business entity that sells products, your gross income would look something like this:
Business Gross Income = Total Revenue – Cost of Goods Sold
Personal gross income: in-depth guide
Whether you are planning your finances or benchmarking insurance policies, there are many cases that will require your personal income details. To help you calculate gross income, consider the following easy steps:
Determine how you get paid
The first thing to consider is whether you are paid hourly. If your salary is consistent from payday to paycheck, you are a salaried worker. This also applies especially to pensions, where you consistently receive the same amount.
In these cases, calculating your gross revenue is relatively easy; the calculation is in the steps below.
Nevertheless, you’ll need to use a different method if your income varies according to the number of hours you worked or if you’re an independent contractor who charges an additional amount for each assignment.
Calculate regular payments
You may determine your gross income if you consistently receive monthly payments by multiplying it by 12. Make sure to include your monthly gross income rather than your net income before any costs are deducted.
If necessary, you can determine your gross income using metrics other than monthly gross income.
These are the formulas:
- Hourly charge x 2000
- Daily charge x 250
- Weekly charge x 50
- Monthly charge x 12
There is still another way for salaried workers to calculate their gross annual income. Moreover, the pay stub or other papers you received when you signed the job offer may include this information directly.
Speak to somebody in your office who can get you a copy of the documentation you signed upon accepting the position if you no longer have it.
Calculate your hourly wages
You’ll need to use a different calculation if your payments are irregular. This can be done simply with the following formula:
Estimated weekly hours worked x hourly charge x 52 = gross income.
The number 52 denotes the number of weeks you work in a year. You should substitute the number for your lower number of weeks worked.
For example, your gross income would be as follows if you worked approximately 30 hours per week every week and were paid Php 170.00 an hour:
30 x 170 x 52 = Php 265,200
It can be difficult to predict your yearly gross income when it fluctuates. However, in many situations where you are required to provide your gross income, a close estimation will do.
When it comes time to file your taxes, you can then calculate the precise amount you made for the year.
Calculate the annual net income
Once you have your expected gross income, consider calculating your annual net income. There are two ways to do this.
The initial choice is to set aside any deductions and other expenses from your gross income. Examples of deductions include taxes and subsidies for kids.
The alternative is to deduct the amounts from your wages before determining your gross income. After deducting all of your earnings, your net yearly gross income remains.
You can use the following easy formula for converting your net annual income to your total gross income:
Net income / (1 – deductions)
For instance, if you know your tax rate is 15% and your net income is Php 298,500, you can solve it like this:
Php 298,500 / (1 – 0.15) = Php 298,500 / 0.85 = Php 351,176.48
What is gross vs. net income?
Gross income is the amount you earn before any deductions. On the other hand, net income is the amount you earn after all deductions, such as taxes, allowances, and costs from sales revenue.
Net income
Moreover, net income in a company is the amount that remains after all costs. The deductions may include salaries and wages, the fee of goods or raw materials, advertising costs, taxes, and other costs.
Net income is an individual’s take-home pay after health insurance, retirement income, taxes, and other deductions.
For financial health to be evident, net income should ideally exceed expenses.
This is different from how organizations compute net income. Businesses compute net income by first subtracting expenses like taxes, operating expenses, and interest expenses from gross income. Such is the total amount of money made.
Gross income
On the other hand, gross income, gross profit, or gross margin refers to the total revenue earned before taxes and other deductions. You can receive your earned income in various ways, including bonuses, salary, tips, hourly pay, dividends from bonds and stocks, and interest on savings accounts.
Other incomes that should be considered include rental income and interest income from investments and savings.
Individual and business gross income would be calculated using the total of all the money you made from these jobs. Add together all of your annual billings to determine your annual salary.
What is an example of a gross annual income?
Gross revenue is the amount of income earned by an individual during a given year before any deductions.
Here is an example of a gross income:
Let’s say Mark makes an annual salary of ₱400,000 from his regular job. In addition to his annual salary, Mark earns ₱300,000 from rental property revenue, ₱80,000 in stock dividends, and ₱2,000 in interest from his savings account. Mark adds these four sums to his gross income. Mark makes ₱782,000 in gross income.
How do you calculate annual income in the Philippines?
To calculate your annual income in the Philippines, gather all your income sources from the relevant taxable year. This will include wages, investment, rental, self-employment, and other sources.
To calculate your AGI or adjusted gross income, add this sum and subtract any tax-deductible costs. Employers are required to give employees their BIR Form 2316, which is used to file taxes, calculate taxable income, and determine the amount of tax owed for the tax year if employed.
Does gross annual income include 13th-month pay?
Yes, gross annual income means everything you earned in a year, and that includes your 13th-month pay. Regardless of tenure, all rank-and-file non-government workers in the Philippines can receive 13th-month pay. Under legal provisions, employees are entitled to an extra month’s income.
The Department of Labor and Employment (DOLE) states that any worker employed for at least one month during the current calendar year is eligible for the 13th-month pay. Moreover, the 13th month’s pay should be equal to one-twelfth (1/12) of the employee’s basic pay. Alternatively, it could also be the sum of their basic pay plus any commissions and other money earned, minus premium pay, night shift difference, and overtime pay.
Employers in the Philippines may consider some non-taxable income, such as health insurance, life insurance proceeds, and social security benefits, when calculating payroll. The income tax exemption threshold is one in particular.
Employees in the Philippines are eligible for an exemption from income tax on benefits and allowances given up to a total yearly value of Php 90,000.
What is an example of gross income and net income?
Gross income for a wage earner is the sum of any pay or wages paid to them by their employer before any deductions are made.
In this instance, net income refers to the remaining earnings after all payroll taxes and retirement plan payments have been subtracted from gross pay.
For example, if an employee receives ₱30,000 in pay, ₱5,000 is deducted from their paycheck as deductions. Their net income is ₱25,000, which is less than their ₱30,000 gross income. Since net income indicates the amount of money available for spending, it is more significant than a person’s gross income figure.
Make Accurate Annual Gross Income Calculations
When computing gross income, errors can happen. However, you can prevent those errors by using more efficient payroll systems. Break free from the manual calculation and use eezi‘s Payroll management tool.
