Have you ever wondered why the Revenue Department divides income into such complicated categories? The simple answer is that "the costs of each occupation are not the same."
Knowing which “section” (Sections 40(1) through 40(8)) your income falls under is key to saving on taxes because it determines how much you can deduct as expenses.
Thairath Money invites you to clearly check which income transferred to your account in 2025 should be classified as what in your tax return form.
1. Income under Section 40(1): Salaried Employees (Salary & Bonus)
This is the largest and most unavoidable group. Income here comes from “labor employment,” including salaries, bonuses, allowances, or even taxes paid by the company.
This group can only claim a standard expense deduction of 50%, capped at 100,000 baht (if combined with 40(2)). Therefore, if you have a high income, deductions through funds or insurance are very important.
2. Income under Section 40(2): Freelance or Side Jobs (Service Income)
Similar to the first group but not full-time employees, such as commissions, piece-rate wages, or position allowances earned per job.
Many people confuse this with Sections 40(6) or 40(7), but remember that 40(2) usually involves work requiring “physical effort and specific skills” without needing to invest in equipment or maintain a permanent storefront.
3. Income under Section 40(3): Royalties / Intellectual Property (Goodwill & Copyright)
For creators, writers, or artists earning money from royalties or copyrights, including annuities.
If you create content or earn income from selling LINE stickers, be sure to check whether your contract is for commissioned work (40(2)) or royalties (40(3)), as the methods for expense deductions differ!
4. Income under Section 40(4): Investors (Interests & Dividends)
Income generated from “money working for us,” such as bank interest, stock dividends, and cryptocurrency benefits.
This income is usually subject to withholding tax, for example:
Taxpayers can choose whether to exclude these from their tax calculation (considered final tax) or include them at year-end, which may result in a refund if their tax base is low.
Additionally, profits from selling digital assets fall under Section 40(4)(ch). From 2025 to 2029, the government exempts personal income tax on gains from selling cryptocurrencies only if sold through platforms licensed in Thailand.
5. Income under Section 40(5): Passive Income (Rental Income)
Income from renting out assets such as houses, condominiums, cars, or land.
The advantage here is a high standard expense deduction (e.g., 30% for houses/buildings), or if you have significant repair costs, you may choose to deduct actual expenses if you have complete receipts.
6. Income under Section 40(6): Independent Professionals (Professional Practices)
Not all freelancers fall into this category. The law restricts it to six professions: medical practice (doctors), law, engineering, architecture, accounting, and fine arts.
Why separate them? Because this group can claim high standard expense deductions (30% - 60%) reflecting the difficulty and responsibility of their profession.
7. Income under Section 40(7): Contractors (Contract of Work)
The key is that you must "procure essential materials yourself," not just provide labor and tools (e.g., construction contractors who buy cement and steel themselves). If the employer buys all materials and you only provide labor, this income is classified as 40(2), which allows much lower expense deductions.
8. Income under Section 40(8): All Other Income
If none of the previous seven categories fit, you likely fall here, such as online sales, running a restaurant, transport businesses, agriculture, or income from selling real estate.
This is the most flexible group because you can choose to deduct actual expenses (if you have complete tax documentation), which is ideal for businesses with low profits but high sales.
In summary, filing income tax for 2025 starts with "categorizing" and managing your income correctly. Misclassifying your income could cause you to lose expense deduction rights or face retrospective audits.
Source: Revenue Department
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