It’s crucial for every employee in Kenya to grasp how Paye deductions are calculated. This knowledge empowers individuals to navigate their financial planning effectively. This article will illustrate the process of calculating Paye on Ksh 1,800,000 in Kenya using the example of Boni Simiyu. This detailed breakdown will help you understand how various deductions affect your net income, providing clarity and insight into the specific impacts of taxation on your earnings.
Summary Table
Here is a comprehensive summary of Boni Simiyu’s salary and deductions:
| Description | Amount (Ksh) |
|---|---|
| Basic Pay | 1,800,000.00 |
| NSSF | 2,160.00 |
| Taxable Pay | 1,797,840.00 |
| Income Tax | 591,527.36 |
| Insurance Relief | -255.00 |
| AHL Relief | -4,050.00 |
| Personal Relief | -2,400.00 |
| PAYE | 584,822.36 |
| Pay After Tax | 1,213,017.64 |
| NHIF | 1,700.00 |
| Housing Levy | 27,000.00 |
| Net Pay | 1,184,317.64 |
Breakdown of Boni Simiyu’s Salary
To provide a clear picture, let’s delve into the specifics of Boni Simiyu’s salary and the corresponding deductions.
Basic Salary
First and foremost, Boni Simiyu’s basic salary is Ksh 1,800,000. This is the starting point for all calculations.
NSSF Deduction
Next, we deduct the NSSF contribution of Ksh 2,160. This mandatory deduction is aimed at securing your retirement benefits.
Taxable Pay
After subtracting the NSSF deduction from the basic salary, we arrive at the taxable pay, which is Ksh 1,797,840. This amount forms the basis for calculating income tax.
Income Tax Calculation
Subsequently, we calculate the income tax on the taxable pay. For Boni Simiyu, this amounts to Ksh 591,527.36.
Reliefs
In Kenya, several tax reliefs help reduce the income tax liability. These include:
- Insurance Relief: Ksh 255.00
- Affordable Housing Levy (AHL) Relief: Ksh 4,050.00
- Personal Relief: Ksh 2,400.00
PAYE Calculation
By subtracting these reliefs from the income tax, we determine the Paye. For Boni Simiyu, the Paye amounts to Ksh 584,822.36.
Pay After Tax
The next step is to calculate the pay after tax by subtracting the PAYE from the taxable pay. Thus, Boni Simiyu’s pay after tax is Ksh 1,213,017.64.
Other Deductions
Further mandatory deductions include the NHIF contribution of Ksh 1,700.00 and the Housing Levy of Ksh 27,000.00.
Net Pay
Finally, by subtracting these additional deductions from the pay after tax, we arrive at the net pay. Boni Simiyu’s net pay is Ksh 1,184,317.64.
Understanding these deductions is vital for managing your finances effectively. By knowing how each deduction impacts your salary, you can plan better and ensure compliance with the tax regulations in Kenya.