SEC. 35. Allowance of Personal Exemption for Individual Taxpayer.

(A) In General. - For purposes of determining the tax provided in Section 24 (A) of this
Title, there shall be allowed a basic personal exemption as follows:

For single individual or married individual judicially decreed as legallyseparated with no

qualified dependents P20,000For Head of Family P25,000For each married individual
P32,000

In the case of married individuals where only one of the spouses is deriving gross
income, only such spouse shall be allowed the personal exemption.

For purposes of this paragraph, the term 'head of family' means an unmarried or legally
separated man or woman with one or both parents, or with one or more brothers or
sisters, or with one or more legitimate, recognized natural or legally adopted children
living with and dependent upon him for their chief support, where such brothers or
sisters or children are not more than twenty-one (21) years of age, unmarried and not
gainfully employed or where such children, brothers or sisters, regardless of age are
incapable of self-support because of mental or physical defect.

(B) Additional Exemption for Dependents. - There shall be allowed an additional

exemption of Eight thousand pesos (P8,000) for each dependent not exceeding four (4).

The additional exemption for dependent shall be claimed by only one of the spouses in
the case of married individuals.

In the case of legally separated spouses, additional exemptions may be claimed only by
the spouse who has custody of the child or children: Provided, That the total amount of
additional exemptions that may be claimed by both shall not exceed the maximum
additional exemptions herein allowed.

For purposes of this Subsection, a 'dependent' means a legitimate, illegitimate or legally

adopted child chiefly dependent upon and living with the taxpayer if such dependent is
not more than twenty-one (21) years of age, unmarried and not gainfully employed or if
such dependent, regardless of age, is incapable of self-support because of mental or
physical defect.

(C) Change of Status. - If the taxpayer marries or should have additional dependent(s)
as defined above during the taxable year, the taxpayer may claim the corresponding
additional exemption, as the case may be, in full for such year.

If the taxpayer dies during the taxable year, his estate may still claim the personal and
additional exemptions for himself and his dependent(s) as if he died at the close of such
year.
If the spouse or any of the dependents dies or if any of such dependents marries,
becomes twenty-one (21) years old or becomes gainfully employed during the taxable
year, the taxpayer may still claim the same exemptions as if the spouse or any of the
dependents died, or as if such dependents married, became twenty-one (21) years old
or became gainfully employed at the close of such year.

(D) Personal Exemption Allowable to Nonresident Alien Individual. - A nonresident

alien individual engaged in trade, business or in the exercise of a profession in the
Philippines shall be entitled to a personal exemption in the amount equal to the
exemptions allowed in the income tax law in the country of which he is a subject - or
citizen, to citizens of the Philippines not residing in such country, not to exceed the
amount fixed in this Section as exemption for citizens or resident of the Philippines:
Provided, That said nonresident alien should file a true and accurate return of the total
income received by him from all sources in the Philippines, as required by this Title.

CHAPTER VII - ALLOWABLE DEDUCTIONS - B

SEC. 36. Items not Deductible.-

(A) General Rule. - In computing net income, no deduction shall in any case be allowed
in respect to -

(1) Personal, living or family expenses;

(2) Any amount paid out for new buildings or for permanent improvements, or
betterments made to increase the value of any property or estate;

This Subsection shall not apply to intangible drilling and development costs incurred in
petroleum operations which are deductible under Subsection (G) (1) of Section 34 of
this Code.

(3) Any amount expended in restoring property or in making good the exhaustion
thereof for which an allowance is or has been made; or

(4) Premiums paid on any life insurance policy covering the life of any officer or
employee, or of any person financially interested in any trade or business carried on by
the taxpayer, individual or corporate, when the taxpayer is directly or indirectly a
beneficiary under such policy.

(B) Losses from Sales or Exchanges of Property. - In computing net income, no

deductions shall in any case be allowed in respect of losses from sales or exchanges of
property directly or indirectly -

(1) Between members of a family. For purposes of this paragraph, the family of an
individual shall include only his brothers and sisters (whether by the whole or half-
blood), spouse, ancestors, and lineal descendants; or
(2) Except in the case of distributions in liquidation, between an individual and
corporation more than fifty percent (50%) in value of the outstanding stock of which is
owned, directly or indirectly, by or for such individual; or

(3) Except in the case of distributions in liquidation, between two corporations more than
fifty percent (50%) in value of the outstanding stock of which is owned, directly or
indirectly, by or for the same individual if either one of such corporations, with respect to
the taxable year of the corporation preceding the date of the sale of exchange was
under the law applicable to such taxable year, a personal holding company or a foreign
personal holding company;

(4) Between the grantor and a fiduciary of any trust; or

(5) Between the fiduciary of and the fiduciary of a trust and the fiduciary of another trust
if the same person is a grantor with respect to each trust; or

(6) Between a fiduciary of a trust and beneficiary of such trust.