This article offers a comprehensive look at Paye deductions, vital for Kenyan employees to manage their finances effectively. It examines the deductions applicable to Charity Mwendwa, who earns a monthly salary of Ksh 1,200,000. Included is a detailed guide on how to calculate Paye on Ksh 1,200,000. Through an analysis of her payslip, the article demonstrates how these deductions directly affect her net pay.
A Table Breakdown of Paye on Ksh 1,200,000
Here’s a structured table detailing the breakdown.
| Component | Amount (Ksh) |
|---|---|
| Basic Salary | 1,200,000.00 |
| NSSF | 2,160.00 |
| Taxable Pay | 1,197,840.00 |
| Income Tax | 381,527.36 |
| Insurance Relief | -255.00 |
| AHL Relief | -2,700.00 |
| Personal Relief | -2,400.00 |
| P.A.Y.E | 376,172.36 |
| Pay After Tax | 821,667.64 |
| NHIF | 1,700.00 |
| Housing Levy | 18,000.00 |
| NET PAY | 801,967.64 |
Gross Salary Breakdown
To begin with, Charity Mwendwa’s gross salary, which comes in at Ksh 1,200,000. This crucial figure serves as the foundation for all subsequent calculations and deductions that will be applied to determine her net pay. In other words, it’s the total amount Charity earns before any taxes or contributions are taken out.
Statutory Deductions
NSSF Contribution
Then, we encounter the NSSF contribution. Every Kenyan employee, mandated by law, contributes a portion of their salary towards retirement benefits. This contribution is deducted directly from Charity’s gross salary, amounting to Ksh 2,160.00. Therefore, her taxable income is Ksh 1,197,840.00.
Calculating Income Tax
Next, income tax is calculated based on the taxable pay after deducting the NSSF contribution. The income tax on this amount totals Ksh 381,527.36.
Income Tax: Ksh 381,527.36
Reliefs and Rebates
Insurance Relief
Moreover, employees like Charity Mwendwa are entitled to insurance relief if they have medical or life insurance policies. She receives an insurance relief of Ksh 255.00.
AHL Relief
In addition to insurance relief, there is also the AHL relief totaling Ksh 2,700.00. This relief aims to encourage home ownership among Kenyans.
Personal Relief
Furthermore, every employee is entitled to a personal relief, currently standing at Ksh 2,400.00.
Total Reliefs:
Insurance Relief: Ksh 255.00
AHL Relief: Ksh 2,700.00
Personal Relief: Ksh 2,400.00
Total Reliefs: Ksh 5,355.00
Net PAYE Calculation
After accounting for the reliefs, the Paye is calculated as follows:
Income Tax: Ksh 381,527.36
Total Reliefs: Ksh 5,355.00
PAYE: Ksh 376,172.36
Final Salary Breakdown
Pay After Tax
Subsequently, after deducting the Paye, Charity’s pay after tax amounts to Ksh 821,667.64.
PAYE: Ksh 376,172.36
Pay After Tax: Ksh 821,667.64
NHIF Contribution
Additionally, the NHIF contribution is Ksh 1,700.00, providing essential health insurance coverage.
NHIF Contribution: Ksh 1,700.00
Housing Levy
Further adding to this, a housing levy of Ksh 18,000.00 is deducted to fund affordable housing projects.
Housing Levy: Ksh 18,000.00
Net Pay
Conclusively, the net pay after all deductions is calculated as follows:
Pay After Tax: Ksh 821,667.64
NHIF Contribution: Ksh 1,700.00
Housing Levy: Ksh 18,000.00
Net Pay: Ksh 801,967.64
Conclusion
In summary, Charity Mwendwa’s example vividly illustrates the various deductions that impact an employee’s salary in Kenya. With a gross salary of Ksh 1,200,000, her net pay after all statutory deductions and reliefs amounts to Ksh 801,967.64. Understanding these deductions is essential for employees to effectively plan their finances and ensure compliance with statutory requirements.