Ever feel baffled by your Kenyan payslip? A key part is PAYE, where your employer automatically withholds income tax from your salary and sends it to the KRA. Let’s break it down into simple steps, using Margaret Njeri’s salary as an example. Margaret earns a basic salary of Ksh 160,000.
Margaret’s Salary Breakdown:
Here’s a table to see exactly where Margaret’s money goes:
| Part of Your Paycheck | Amount (Ksh) | Explanation |
|---|---|---|
| Basic Pay | 160,000.00 | This is your total salary before any deductions. |
| NSSF Contribution | 2,160.00 | This amount goes towards your National Social Security Fund. |
| Taxable Pay | 157,840.00 | We calculate your income tax using this amount (Basic Pay minus NSSF). |
| Income Tax | 42,135.36 | This is the initial income tax based on Kenya’s tax brackets. |
Lowering Your Tax Bill
Before finalizing her tax amount, Margaret gets some deductions that reduce her taxable income:
- Insurance Relief (Ksh -255.00): This lowers Margaret’s taxable income because she contributes to NHIF.
- AHL Relief (Ksh -360.00): This is a new deduction for contributions towards housing initiatives.
- Personal Relief (Ksh -2,400.00): Everyone receives this standard deduction.
Calculating Margaret’s PAYE
Now that we’ve applied these deductions, let’s calculate Margaret’s final PAYE amount:
- PAYE (Ksh 39,120.36): We subtract Insurance Relief, AHL Relief, and Personal Relief from Income Tax.
What You Get Paid
Now it’s time to see how much money Margaret actually takes home after taxes and contributions:
- PAY After Tax (Ksh 118,719.64): This is the amount Margaret receives after income tax deductions (Basic Pay minus NSSF minus PAYE).
More Deductions to Consider
There are still a couple of final deductions taken out of Margaret’s remaining salary:
- NHIF Contribution (Ksh 1,700.00): This money goes towards your National Hospital Insurance Fund.
- Housing Levy (Ksh 2,400.00): This is your contribution towards affordable housing (your employer also contributes an additional Ksh 2,400 not shown here).
- NET PAY (Ksh 114,619.64): This is the final amount Margaret receives after all deductions (PAY After Tax minus NHIF minus Housing Levy).