What is PAYE?
Ever scrutinize your payslip wondering where a chunk of your salary goes? In Kenya, Pay As You Earn (PAYE) plays a key role, collecting income tax throughout the year. Let’s use Tabitha Wambui, a head chef at a prestigious Kenyan restaurant, as an example to understand PAYE’s impact on your take-home pay.
PAYE is a system where the Kenyan Revenue Authority collects income tax through monthly deductions from your salary. This ensures a steady flow of tax revenue for the government.
Understanding Tabitha’s Payslip Breakdown:
The table below summarizes the key components of Tabitha’s payslip:
| Description | Amount (Ksh) |
|---|---|
| Basic Pay | 90,000.00 |
| NSSF | 2,160.00 |
| Taxable Pay (Basic Pay – NSSF) | 87,840.00 |
| Income Tax | 21,135.36 |
| Reliefs and Allowances | |
| – Insurance Relief | 240.00 |
| – A.H.L Relief (Housing Levy Relief) | 202.50* |
| – Personal Relief | 2,400.00 |
| Total Reliefs and Allowances | 2,842.50 |
| PAYE (Income Tax – Reliefs & Allowances) | 18,292.86 |
| Other Deductions | |
| – NHIF (National Hospital Insurance Fund) | 1,600.00 |
| – Housing Levy | 1,350.00 |
| Net Pay (Basic Pay – Total Deductions) | 66,597.14 |
Calculating PAYE:
Tabitha’s PAYE is calculated by subtracting the total reliefs and exemptions from her initial income tax amount. These reliefs help reduce her taxable income, ultimately lowering her tax burden.
Additional Deductions:
NHIF and Housing Levy are mandatory deductions on top of PAYE. NHIF provides health insurance, while the Housing Levy supports affordable housing initiatives.pen_spark
Net Pay:
This is the amount Tabitha receives after all deductions, including PAYE, NHIF and Housing Levy.
Net Pay = Ksh 66,597.14
Empowering Yourself:
Analyzing your payslip like this empowers you to understand your tax contributions and how various deductions affect your net income.