Understanding how Paye deductions work is crucial for employees in Kenya, especially those earning higher incomes. In this article, we’ll delve into the Paye on Ksh 1,500,000 in Kenya using Sudi Wamalwa as an example. We’ll explore how his net pay is calculated after various statutory deductions.
Basic Pay and Statutory Deductions
Sudi Wamalwa’s Basic Pay
Sudi’s gross monthly salary totals Ksh 1,500,000. This figure serves as the starting point for calculating his PAYE deductions.
NSSF Contribution
The first deduction is Sudi’s contribution to NSSF, amounting to Ksh 2,160. This mandatory deduction is subtracted from his basic pay.
Determining Taxable Pay
After deducting the NSSF contribution, Sudi’s taxable income stands at Ksh 1,497,840.
Calculating Paye
Computing Income Tax
Income tax is then calculated based on Sudi’s taxable pay, resulting in an amount of Ksh 486,527.36.
Applying Tax Reliefs
Several tax reliefs help reduce Sudi’s overall tax liability:
- Insurance Relief reduces the tax burden by Ksh 255.
- AHL Relief provides a further reduction of Ksh 3,375.
- Personal Relief reduces taxes by Ksh 2,400.
These reliefs are subtracted from the income tax to determine Sudi’s final Paye liability.
Determining PAYE Amount
After factoring in the reliefs, Sudi’s PAYE amount totals Ksh 480,497.36.
Other Deductions
NHIF
Sudi also contributes Ksh 1,700 to NHIF, which provides health insurance coverage.
Housing Levy Deduction
Additionally, Sudi contributes Ksh 22,500 to the Housing Levy, aimed at financing affordable housing projects.
Calculating Net Pay
To find out Sudi’s net pay, we subtract the total Paye, NHIF, and Housing Levy from his taxable income.
- PAYE: Ksh 480,497.36
- NHIF: Ksh 1,700
- Housing Levy: Ksh 22,500
After these deductions, Sudi’s net pay amounts to Ksh 993,142.64.
Summary
In summary, Sudi Wamalwa’s Paye deductions and other statutory contributions are as follows:
- Basic Pay: Ksh 1,500,000.00
- NSSF: Ksh 2,160.00
- Taxable Pay: Ksh 1,497,840.00
- Income Tax: Ksh 486,527.36
- Insurance Relief: Ksh 255.00
- AHL Relief: Ksh 3,375.00
- Personal Relief: Ksh 2,400.00
- PAYE: Ksh 480,497.36
- NHIF: Ksh 1,700.00
- Housing Levy: Ksh 22,500.00
- Net Pay: Ksh 993,142.64
Understanding how Paye affects a salary of Ksh 1,500,000 in Kenya allows employees like Sudi Wamalwa to better manage their finances and plan their budget effectively, taking into account statutory deductions that impact their take-home pay.