Employee taxes can get complicated, especially with all the deductions and reliefs involved. However, understanding these elements is crucial for calculating your take-home salary. Therefore, this example will guide you through calculating PAYE in Kenya. We’ll walk you through the steps to determine Halima Hamisi’s net pay, considering her basic salary, mandatory deductions, reliefs, and additional contributions.
Step 1: Gross Pay, Deductions, and Taxable Pay
Halima’s gross pay is her basic salary, which is Ksh 100,000. There’s a mandatory deduction for her contribution to the National Social Security Fund (NSSF), which amounts to Ksh 2,160. Subtracting this deduction from the gross pay gives us the taxable pay of Ksh 97,840.
Step 2: PAYE Calculation and Reliefs
We’d typically use the official Kenyan tax tables to determine the income tax applicable to Halima’s taxable income. The example shows a total income tax of Ksh 24,135.36. This likely involves applying the tax rate to various portions of her taxable income based on the tax brackets.
Halima is eligible for certain reliefs that reduce her tax burden. These include insurance relief (Ksh -255), AHL relief (Ksh -225), and personal relief (Ksh -2,400). We can combine these reliefs into a total of Ksh -2,880. Subtracting this total from the income tax gets us the adjusted PAYE amount of Ksh 21,255.36 (Ksh 24,135.36 – Ksh 2,880).
Table 1: Summary of Earnings, Deductions, Reliefs, and PAYE
| Description | Amount (Ksh) |
|---|---|
| Basic Pay | 100,000 |
| NSSF Contribution | – 2,160 |
| Taxable Pay | 97,840 |
| Income Tax | 24,135.36 |
| Insurance Relief | – 255 |
| AHL Relief | – 225 |
| Personal Relief | – 2,400 |
| Total Reliefs | – 2,880 |
| Adjusted PAYE | 21,255.36 |
Step 3: Net Pay and Additional Deductions
The calculation of Halima’s net pay involves two key steps. First, we need to determine her net pay before additional deductions. To achieve this, we subtract the adjusted PAYE of Ksh 21,255.36 from her taxable income of Ksh 97,840. This leaves us with a net pay before additional deductions of Ksh 76,584.64 (Ksh 97,840 – Ksh 21,255.36).
However, it’s crucial to consider two additional mandatory deductions that affect Halima’s final take-home pay. These are contributions to the National Hospital Insurance Fund (NHIF) at Ksh 1,700 and the Housing Levy at Ksh 1,500.
To arrive at her final net pay, we subtract these additional deductions from her net pay before additional deductions. This gives us a final net pay of Ksh 73,384.64 (Ksh 76,584.64 – Ksh 3,200). This amount represents the actual money Halima receives after all taxes and mandatory contributions have been withheld.
Important Note: It’s crucial to refer to the latest Kenyan tax tables for the most accurate PAYE calculations. These tables are subject to change.