Calculating Paye on Ksh 900,000 is as easy as it sounds. Paye is a system that deducts income tax from your paycheck throughout the year. By understanding Paye, you can grasp how much tax you contribute and how it affects your take-home pay.
Let’s break down a sample payslip using Mike Kyallo’s details to illustrate Paye calculations.
Breakdown of Mike Kyallo’s Payslip
Here is a table showing the breakdown of Mike Kyallo’s payslip:
| Earning/Deduction | Amount (Ksh) |
|---|---|
| Basic Pay | 900,000.00 |
| NSSF | 2,160.00 |
| Taxable Pay | 897,840.00 |
| Income Tax | 276,527.36 |
| Insurance Relief | -255.00 |
| AHL Relief | -2,025.00 |
| Personal Relief | -2,400.00 |
| PAYE | 271,847.36 |
| Pay After Tax | 625,992.64 |
| NHIF | 1,700.00 |
| Housing Levy | 13,500.00 |
| Net Pay | 610,792.64 |
Basic Pay
First, we start with Basic Pay: Ksh 900,000.00. This is Mike’s total salary before any deductions are applied.
NSSF Deduction
Next, we have the NSSF contribution: Ksh 2,160.00. This amount is a mandatory deduction for all employed individuals in Kenya.
Taxable Income
After deducting the NSSF contribution from the Basic Pay, we get the Taxable Income: Ksh 897,840.00 (Ksh 900,000.00 – Ksh 2,160.00).
Calculating PAYE
Initial Income Tax
Now, let’s calculate the initial Income Tax: Ksh 276,527.36. Kenya uses a progressive tax system, where the tax rate increases with higher income brackets. This is the initial tax amount based on Mike’s taxable income.
Applying Reliefs and Allowances
To reduce the tax burden, we subtract various reliefs and allowances:
- Insurance Relief: Ksh -255.00
- AHL Relief (Affordable Housing Levy Relief): Ksh -2,025.00
- Personal Relief: Ksh -2,400.00
These deductions acknowledge various personal expenses and are subtracted from the initial income tax.
Net PAYE
After applying the reliefs and allowances, we get the Net PAYE: Ksh 271,847.36 (Ksh 276,527.36 – Ksh 255.00 – Ksh 2,025.00 – Ksh 2,400.00).
Determining the Net Pay
Pay After Tax
Next, we calculate Pay After Tax: Ksh 625,992.64. This is the Basic Pay minus the Net PAYE (Ksh 900,000.00 – Ksh 271,847.36).
Additional Deductions
Further deductions include:
- NHIF (National Hospital Insurance Fund): Ksh 1,700.00. This is a mandatory contribution for health insurance.
- Housing Levy: Ksh 13,500.00. This levy supports affordable housing initiatives.
Final Net Pay
Finally, after subtracting the additional deductions, we arrive at the Final Net Pay: Ksh 610,792.64 (Ksh 625,992.64 – Ksh 1,700.00 – Ksh 13,500.00).
Understanding Your Payslip
By examining Mike’s payslip, you can see the detailed breakdown of deductions from his gross salary. Understanding PAYE and other deductions allows you to appreciate how your income is taxed and how it contributes to various social programs in Kenya. This knowledge empowers you to manage your finances better and understand the value of the social benefits provided by these deductions.