How to calculate Paye for Ksh280,000 shouldn’t be such a struggle as you will see in this article. PAYE is a crucial tax system in Kenya, where employers deduct tax from their employees’ salaries and remit it to the KRA. This system simplifies tax collection and ensures compliance. To understand PAYE better, let’s examine the case of Hellen Wendy, a CEO in Kenya who earns a basic salary of Ksh 280,000.
Breakdown of Hellen Wendy’s Salary and Deductions
Basic Pay
Hellen Wendy’s basic pay stands at Ksh280,000
NSSF Contribution
Hellen Wendy contributes Ksh 2,160.00 to the NSSF . Both employees and employers make this mandatory contribution toward the employee’s retirement fund.
Taxable Pay
Taxable pay is calculated by subtracting NSSF contribution from the basic pay. So, Ksh280,000−Ksh2,160.
After deducting the NSSF contribution, Hellen’s taxable pay is Ksh277,840.00.
Income Tax
Income tax is calculated based on the taxable pay. Hellen’s income tax on the taxable pay of Ksh 277,840.00 amounts to Ksh 78,135.36. The tax rates in Kenya are progressive, meaning higher income brackets attract higher tax rates.
Applying Tax Reliefs
Insurance Relief
Hellen receives an insurance relief of Ksh 255.00.
AHL Relief
She also benefits from an AHL relief of Ksh 630.00.
Personal Relief
Additionally, Hellen enjoys a personal relief of Ksh 2,400.00.
These reliefs are subtracted from the income tax to determine the PAYE amount. Total reliefs amount to Ksh,3,285.00
PAYE Calculation
To calculate the PAYE amount, we subtract the total reliefs from the income tax. The total reliefs are Ksh 3,285.00. Thus, the PAYE amount is Income tax; Ksh 78,135.36.- All reliefs;Ksh,3,285.00.The total PAYE amount is Ksh 74,850.36.
Net Pay Calculation
Pay After Tax
After accounting for PAYE, Hellen’s pay after tax is Ksh 202,989.64.
Additional Deductions
However, there are additional mandatory deductions:
NHIF Contribution
Hellen contributes Ksh 1,700.00 to the NHIF, a mandatory health insurance scheme.
Housing Levy
Moreover, she pays a Housing Levy of Ksh 4,200.00, which funds government affordable housing projects.
Net Pay
Finally, Hellen’s net pay, after all deductions, is Ksh 197,089.64.
Conclusion
Hellen Wendy’s case highlights how the PAYE system in Kenya works. Her high gross salary of Ksh 280,000.00 is significantly reduced due to various mandatory contributions and tax deductions. Understanding these deductions and reliefs is essential for employees to manage their finances and ensure compliance with tax regulations effectively.
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