Pag-IBIG Contribution and Deduction
Updated June 13, 2026
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Definition
A mandatory monthly contribution to the Home Development Mutual Fund (HDMF), commonly known as Pag-IBIG Fund, deducted from employee pay and matched by employers. The employee share is 2% of monthly compensation (1% if the employee earns ₱1,500 or less), the employer share is 2%, and both are computed on a maximum fund salary of ₱10,000, so each share is at most ₱200 a month.
Pag-IBIG contributions are required under Republic Act No. 9679 (Home Development Mutual Fund Law of 2009). Coverage is mandatory for all employees covered by SSS and GSIS and their employers, uniformed members of the AFP, BFP, BJMP and PNP, and Filipinos employed by foreign-based employers (RA 9679, Sec. 6). The fund is a savings program that provides housing loans, short-term loans and provident benefits to members. Employees contribute 1% of monthly compensation if they earn ₱1,500 or less and 2% if they earn more; employers contribute 2% (RA 9679, Sec. 7). The law lets the HDMF Board set the maximum monthly compensation used for computing contributions. Since February 2024 that maximum fund salary is ₱10,000, so the mandatory share is capped at ₱200 a month each for employee and employer. For tax purposes, the employee's share of Pag-IBIG contributions is excluded from gross income (NIRC Sec. 32(B)(7)(f)). Employer contributions are deductible by the employer as an ordinary and necessary business expense.
Detailed explanation
Overview
Pag-IBIG (Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya, at Gobyerno) is a mandatory savings and home financing program administered by the Home Development Mutual Fund (HDMF). Coverage is mandatory for all employees covered by SSS and GSIS and their employers, uniformed members of the AFP, BFP, BJMP and PNP, and Filipinos employed by foreign-based employers (RA 9679, Sec. 6).
Contribution Structure
Employee and Employer Shares
Employees contribute 2% of monthly compensation, or 1% if they earn ₱1,500 or less, and employers contribute 2% (RA 9679, Sec. 7). For example, an employee earning ₱8,000 a month contributes ₱160 (2%), and the employer also contributes ₱160. The employer may not recover its share from the employee.
Maximum Contribution Ceiling
RA 9679 set the maximum monthly compensation for computing contributions at ₱5,000 and allowed the HDMF Board to raise it. Since February 2024 the maximum fund salary is ₱10,000, so the mandatory contribution is capped at ₱200 a month for the employee and ₱200 for the employer. Members may contribute more voluntarily.
Tax Treatment
Exclusion for Employees
The employee's share of Pag-IBIG contributions is excluded from gross income (NIRC Sec. 32(B)(7)(f)), together with SSS, GSIS and PhilHealth contributions and union dues. For instance, an employee earning ₱600,000 a year whose Pag-IBIG share is ₱2,400 does not pay tax on that ₱2,400. The Fund's assets, contributions, earnings and benefit payments are also exempt from tax (RA 9679, Sec. 19).
Employer Deduction
Employer contributions to Pag-IBIG are an ordinary and necessary business expense, deductible by the employer in computing its taxable income.
Coverage and Exemptions
Mandatory Coverage
All employees covered by SSS or GSIS, regardless of salary level or employment status, are covered, including contractual and project-based workers who are SSS-covered employees. Filipinos employed by foreign-based employers, including OFWs, are also covered on a mandatory basis (RA 9679, Sec. 6).
Voluntary Coverage
Self-employed individuals and professionals can become members. Spouses who manage the household full-time may join voluntarily, using one-half of the employed spouse's monthly compensation as the basis of contributions (RA 9679, Sec. 6).
Benefits and Utilization
Housing Loan Programs
Members can borrow for the purchase, construction or improvement of a home. The property secures the loan, and HDMF sets interest rates by program and repricing period.
Savings and Maturity Benefits
Contributions accumulate in the member's savings, which earn dividends declared by HDMF. Membership runs for 20 years, with 240 monthly contributions at maturity, and ends earlier on retirement, disability, insanity, death, departure from the country or other causes the Board allows. Members who joined after RA 9679 took effect and have no outstanding housing loan may withdraw their savings after 15 years of continuous membership (RA 9679, Sec. 8).
Compliance and Remittance
Employers remit employee and employer contributions to HDMF every month by the deadline HDMF sets and keep records of contributions. HDMF may bring action against a delinquent employer within 20 years from the time the delinquency is known or assessed (RA 9679).
Why it matters
Pag-IBIG contributions are a mandatory savings mechanism that builds a fund for housing loans and provident benefits, and the employee share is not taxed. For Filipino employees, understanding the deduction helps with take-home pay calculations and long-term planning. Employers must remit contributions on time to avoid penalties and so that employees' savings are properly credited.
How it works
Contribution Calculation and Deduction
The employer computes the employee share at 2% of monthly compensation (1% if ₱1,500 or less) and its own share at 2%, both on compensation up to the ₱10,000 maximum fund salary. The employee share is deducted from pay, and the employer may not deduct its own share from the employee (RA 9679, Sec. 7).
Employer Remittance and Compliance
Employers remit both shares to HDMF every month through its collection channels, by the deadline HDMF sets for the employer, and keep records of contributions. Late remittance incurs penalties under HDMF rules.
Member Benefit Access
Members can apply for housing loans and short-term loans. Savings earn dividends declared by HDMF. Membership runs for 20 years (240 monthly contributions), and savings are paid out at maturity or earlier on retirement, disability, death, departure from the country or other grounds HDMF allows (RA 9679, Sec. 8).
Tax Benefit Realization
The employee's mandatory share is excluded from gross income, which lowers taxable compensation. For example, a ₱600,000 earner who contributes ₱200 a month excludes ₱2,400 a year; at the 20% bracket that saves ₱480 in income tax (NIRC Sec. 32(B)(7)(f)).
Examples
Salaried employee earning ₱50,000 monthly
Maria earns ₱50,000 a month. Her contribution is computed on the ₱10,000 maximum fund salary, so she pays ₱200 (2%) and her employer pays ₱200. Her annual share of ₱2,400 is excluded from her taxable compensation (NIRC Sec. 32(B)(7)(f)).
Employee earning ₱8,000 monthly
Juan earns ₱8,000 a month. His share is 2% of ₱8,000, or ₱160, and his employer also pays ₱160. His annual share of ₱1,920 is excluded from his taxable compensation (RA 9679, Sec. 7).
High-income employee at ₱250,000 monthly
Anna earns ₱250,000 a month, but contributions are computed on the ₱10,000 maximum fund salary, so the mandatory share is ₱200 for her and ₱200 for her employer. Anna can save more through voluntary contributions or the MP2 savings program, whose dividends are tax-exempt (RA 9679, Sec. 19).
Self-employed professional contribution
Ramon is a self-employed accountant with no employer. He can join Pag-IBIG as a member and contribute on his own, building savings that qualify him for housing and short-term loans. Contributions, earnings and benefit payments of the Fund are exempt from tax (RA 9679, Sec. 19).
Employee accessing housing loan benefit
Sofia has been a member for 10 years and applies for a Pag-IBIG housing loan to buy a house. The house and lot serve as security for the loan, and she chooses a repricing period; HDMF sets the interest rate for each period. Her monthly amortization is deducted through payroll or paid directly to HDMF.
Common misconceptions
- Myth: Pag-IBIG contributions reduce take-home pay with no tax benefit.
- Fact: The employee's share is excluded from gross income under NIRC Sec. 32(B)(7)(f), so it is not taxed, and the savings earn dividends and fund loan eligibility.
- Myth: Only employees contribute to Pag-IBIG; employers have no obligation.
- Fact: Employers contribute 2% of each covered employee's monthly compensation, up to the maximum fund salary, and cannot deduct this share from the employee (RA 9679, Sec. 7).
- Myth: Pag-IBIG contributions can be withdrawn anytime like a regular savings account.
- Fact: Savings are paid at the end of the 20-year membership term or on retirement, disability, death, departure from the country or other allowed grounds; members can also withdraw after 15 years if they have no housing loan (RA 9679, Sec. 8).
- Myth: Government employees and GSIS members are exempt from Pag-IBIG.
- Fact: Coverage is mandatory for employees covered by GSIS as well as SSS, including uniformed personnel (RA 9679, Sec. 6).
- Myth: The Pag-IBIG contribution rate has increased to 3% or higher in recent years.
- Fact: The rates are still 2% for employees (1% at ₱1,500 or less) and 2% for employers. What changed in February 2024 was the maximum fund salary, raised from ₱5,000 to ₱10,000, which moved the monthly cap from ₱100 to ₱200 per side.
Questions people ask
Is Pag-IBIG contribution deductible from my income tax?
The employee's share of Pag-IBIG contributions is excluded from gross income (NIRC Sec. 32(B)(7)(f)), so it is not taxed. With the share capped at ₱200 a month, a ₱600,000 earner excludes ₱2,400 a year, about ₱480 in tax at the 20% bracket.
What is the maximum Pag-IBIG contribution per month?
The mandatory share is ₱200 a month for the employee and ₱200 for the employer, because contributions are computed on a maximum fund salary of ₱10,000 since February 2024. Members can contribute more voluntarily.
Can I withdraw my Pag-IBIG savings before retirement?
Savings are paid at the end of the 20-year membership term or earlier on retirement, disability, death, departure from the country or other grounds HDMF allows. Members who joined after RA 9679 took effect and have no outstanding housing loan can also withdraw after 15 years of continuous membership (RA 9679, Sec. 8).
Are government employees required to contribute to Pag-IBIG?
Yes. Coverage is mandatory for all employees covered by GSIS as well as SSS, including uniformed members of the AFP, BFP, BJMP and PNP (RA 9679, Sec. 6).
What happens if my employer does not remit my Pag-IBIG contribution?
The employer remains liable for the unpaid contributions and penalties. HDMF can sue a delinquent employer within 20 years from the time the delinquency is known or assessed (RA 9679). You can report the non-remittance to HDMF so your contributions are credited.
How is the Pag-IBIG contribution calculated if my salary is ₱1,500 or below?
Employees earning ₱1,500 or less a month contribute 1% of their monthly compensation, and the employer still contributes 2% (RA 9679, Sec. 7). Coverage does not depend on the salary level.
What is the interest rate on a Pag-IBIG housing loan?
HDMF sets housing loan rates by loan program and by the repricing period the borrower chooses, and publishes the rates for each period.
In practice
- Employers deduct Pag-IBIG from every payroll for covered employees, whatever their salary level, and remit both shares to HDMF monthly.
- Payroll teams compute contributions at 2% (1% for pay of ₱1,500 or less) on compensation up to the ₱10,000 maximum fund salary, for a maximum of ₱200 per side each month.
- Employees can check that the Pag-IBIG deduction appears on their payslip and among the non-taxable items on their BIR Form 2316.
- Employers keep Pag-IBIG remittance records to support both HDMF compliance and their deduction of employer contributions as a business expense.
- Members check their savings balance, apply for loans and track their membership term through HDMF's online services or branches.
Next steps
Learn more
Philippine Payroll Tax Calculator
compute net pay after Pag-IBIG deductions
BIR Form 2316 Guide
understanding tax certificates with Pag-IBIG contributions
Monthly Tax Withholding Calculator
factor in Pag-IBIG for accurate tax computation
SSS Contribution Guide
compare mandatory contribution requirements
PhilHealth Contribution Calculator
complete mandatory deductions overview
Annual Income Tax Return Guide
treatment of Pag-IBIG contributions
Employee Benefits Tax Guide
tax treatment of employer contributions
Mandatory Deductions Checklist
ensure compliance with all requirements
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Sources & References (3)
Primary sources and the laws, regulations, and official issuances this page relies on. Each citation links directly to the issuing authority’s document.
- Home Development Mutual Fund (Pag-IBIG). “Pag-IBIG Circular No. 460: MFS raised to P10,000 and rate to 2% effective Feb 2024 (max P200 per side).” pagibigfund.gov.ph. Home Development Mutual Fund (Pag-IBIG), Circular No. 460. Accessed .
- LawPhil Project (Arellano Law Foundation). “RA 9679 (Home Development Mutual Fund Law of 2009): full enacted text.” lawphil.net. Republic Act No. 9679, HDMF Law of 2009. Accessed .