So how do your dues get to Ceaser? Here’s a simple breakdown:
Take note, Taxable Income=Gross Income less allowable deductions
Your Gross Income=Basic salary+Allowances
*Allowable deductions refer to all contribution towards a pension or a provident scheme.
If Wanjiku’s Gross monthly income is KES 50,000 and her Allowable deductions total KES17,000, then her Taxable income is 33,ooo.
In Kenya, KRA’s Individual Tax rate brackets as at 2012 can be represented as in the table below:
Personal tax relief in Kenya is KES13,944 per annum. The following may be deducted from taxable income:
- Up to Ksh150,000 annually in mortgage interest for owner-occupied property
- Contributions to a registered pension or provident fund up to KES240,000 annually (the deduction may not exceed 30% of employment income)
- 15% of health or life insurance premium payments (up to KES60,000 annually)
- Daily subsistence allowance up to KES2,000 paid when working away from the normal place of duty is not taxable
- For instance take Wanjiku’s monthly taxable income as KES33, 000. This means that her total annual taxable income is KES396,000. this means that Wanjiku will be taxed in the 1st, 2nd and 3rd brackets
Calculating Wanjikus total annual tax therefore = 12,196+29,432+((396,000-351,793)÷(25/100))
Thus =Gross Tax 52679.75
Net Tax=Gross Tax-Tax Relief
52,679.75-13,944
Hence 38,735.75
Tax Matters: II. Next Week