Peter Otieno, a newly employed accountant in Mombasa, finds himself in the common predicament of many Kenyan employees – understanding the intricacies of his salary deductions. With a gross monthly income of Ksh45,000, Peter is eager to comprehend how much of his earnings will be deducted as Pay As You Earn (PAYE), alongside other statutory deductions such as NSSF, NHIF and Housing Levy.
Understanding Your Payslip Breakdown
Here’s a breakdown of the potential components you might see on your payslip, based on your 45,000 KES salary example:
| Description | Amount (KES) | Explanation |
|---|---|---|
| Basic Pay | 45,000.00 | This is your total salary before any deductions. |
| NSSF Contribution | -2,160.00 | This mandatory contribution goes towards your retirement benefits. |
| Taxable Pay | 42,840.00 | This is your basic pay minus NSSF, used to calculate income tax. |
| Income Tax | -7,635.36 | This is the estimated tax payable to KRA based on your taxable income. Note: The actual amount may vary slightly. |
| Tax Reliefs | These deductions reduce your tax liability: | |
| – Insurance Relief (15% of NHIF) | +165.00 | Reduces tax by 15% of your monthly NHIF contribution. |
| – AHL Relief (15% of Housing Levy) | +101.25 | Reduces tax by 15% of your monthly Housing Levy contribution. |
| – Personal Relief | +2,400.00 | Basic tax-free amount provided by the government. |
| Total Tax Reliefs | +2,666.25 | Total tax reliefs deducted from your income tax. |
| PAYE (Tax Payable) | -4,969.11 | This is your income tax minus tax reliefs (the remaining tax to be paid). |
| Net Pay | 37,870.89 | This is your take-home pay after tax deductions (NSSF, PAYE). |
| NHIF Contribution (National Hospital Insurance Fund) | -1,100.00 | This mandatory contribution provides you with access to healthcare services. |
| Housing Levy (Affordable Housing Development Levy) | -675.00 | This mandatory contribution goes towards affordable housing initiatives. Note: Housing Levy is deducted after tax. |
| Total Deductions | -8,904.11 | Sum of all deductions from your gross pay (NSSF, NHIF, PAYE, Housing Levy) |
| Net Pay | 36,095.89 | This is your final take-home pay after all deductions. |
Peter Otieno’s case exemplifies the complexity of salary deductions in Kenya, particularly for individuals earning modest incomes. Understanding the components of one’s salary breakdown is essential for financial planning and budgeting. As the Kenyan tax system evolves, it’s crucial for employees like Peter to stay informed about any changes that may affect their take-home pay.
Remember
- This is a simplified example, and your actual deductions may vary based on your individual circumstances. You can use the KRA P.A.Y.E Calculator to estimate your monthly PAYE deductions.