The GINHAWA Act: Understanding Proposed Changes to Income Tax Exemptions

Senate Bill No. 56, also known as the GINHAWA Act, is a proposal aiming to adjust the income tax exemption threshold and the tax-free bonus cap for Filipino workers. Proposed by Senator Win Gatchalian, this bill seeks to provide financial relief by increasing the amount of income and compensation that is shielded from taxes. The core of the GINHAWA Act is to grant an increase in take-home pay for all working Filipinos, addressing concerns about rising living costs and their impact on household budgets.

The current tax exemption threshold stands at ₱250,000 annually. The GINHAWA Act proposes to raise this to ₱400,000. Additionally, the bill aims to increase the cap for tax-free bonuses from the current ₱90,000 to ₱150,000. These changes, if enacted, would mean that a larger portion of a worker’s earnings would not be subject to income tax. It is important to remember that this bill is still a proposal and has not yet become law. The existing tax rules and thresholds remain in effect until any new legislation is passed.

Key Provisions of the GINHAWA Act

The GINHAWA Act introduces specific adjustments to two main areas of a worker’s compensation: annual income and bonuses. These adjustments are designed to directly impact the amount of money employees take home each payday and year. Understanding these proposed changes is key to grasping the potential effects of the bill.

Increased Income Tax Exemption Threshold

One of the most significant aspects of Senate Bill No. 56 is the proposed increase in the annual income tax exemption threshold. Currently, individuals earning up to ₱250,000 per year are exempt from paying income tax on that amount. The GINHAWA Act seeks to raise this tax-free income limit to ₱400,000. This means that the first ₱400,000 of an individual’s annual earnings would be free from income tax, representing a substantial increase of ₱150,000 compared to the current threshold.

Higher Tax-Free Bonus Cap

In addition to the income exemption, the GINHAWA Act also targets the tax treatment of bonuses and other forms of additional compensation. The current law allows for a tax-free bonus amount of up to ₱90,000. The proposed bill aims to increase this tax-free bonus cap to ₱150,000. This adjustment would provide a greater tax benefit for employees who receive 13th-month pay and other performance-based or holiday bonuses, allowing them to keep more of this extra income.

Other Forms of Compensation for Tax Exemption

Beyond the primary adjustments to the income threshold and bonus cap, the GINHAWA Act also specifies other forms of compensation that would be eligible for tax exemption under the proposed law. These inclusions further broaden the scope of potential tax relief for workers. The bill lists several types of pay that would be shielded from taxation, alongside the increased income and bonus limits.

These additional forms of compensation include:

• Service Charges: Amounts collected by hotels and restaurants as service charges, which are often distributed among staff.
• Overtime Pay: Compensation paid to employees for hours worked beyond their regular working schedule.
• Holiday Pay: Extra pay received for working on designated holidays.
• Night-Shift Differential: Additional pay for employees who work during nighttime hours.
• Hazard Pay: Extra compensation provided to workers who are exposed to hazardous conditions or environments as part of their job.

By including these various types of pay, the GINHAWA Act aims to provide a more comprehensive tax relief package for a wider range of employee earnings.

Rationale Behind the Proposed Changes

Senator Win Gatchalian has presented the GINHAWA Act as a necessary measure to help Filipino workers cope with the rising cost of living. The proposal is closely linked to economic factors, particularly the impact of global oil prices on household expenses. The senator has emphasized the need for swift action, especially if geopolitical events continue to affect fuel costs.

The argument for the GINHAWA Act is rooted in the concept of preserving purchasing power. As prices for essential goods and fuel increase, the real value of a worker’s income can diminish. By reducing the tax burden, the bill aims to increase the disposable income available to families, helping them manage their budgets more effectively. The senator’s call for faster legislative action is directly tied to the potential for continued increases in crude oil prices, which could further strain the finances of ordinary citizens.

Context Within Broader Tax Discussions

The GINHAWA Act is not an isolated proposal but rather part of a larger conversation in 2026 regarding personal income tax relief in the Philippines. Several benchmarks and proposals have emerged, highlighting different perspectives on how to best support taxpayers. These discussions aim to balance the need for government revenue with the goal of easing financial burdens on individuals and families.

One notable point of reference is President Ferdinand R. Marcos, Jr.’s State of the Nation Address in July 2026. During his address, the President suggested raising the income tax threshold to ₱350,000. This figure is lower than the ₱400,000 proposed in Senator Gatchalian’s GINHAWA Act, indicating varying levels of proposed relief among policymakers.

Furthermore, the Philippine Statistics Authority has provided an inflation-adjusted benchmark. In September 2026, the agency reported that to maintain the purchasing power of the current ₱250,000 tax-free threshold, it would need to be increased to approximately ₱356,000 in 2026. These different figures – the existing ₱250,000, the inflation benchmark of ₱356,000, the President’s proposal of ₱350,000, and the GINHAWA Act’s proposal of ₱400,000 – represent various points in the ongoing debate about tax relief and its appropriate level. It is crucial to note that none of these figures represent enacted law; they are part of policy discussions and proposals.

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