Question

The table below shows taxation rates in Kenya

Monthly taxable income (kshs p.m)	Tax rate %
1-9680	10
9681-18800	15
18801-27920	20
27921-37040	25
37041 and above	30

A civil servant is provided with a house and pays a nominal rent of sh 6,260 per month. In addition the government gives him taxable allowances amounting to sh 16,000 per month. He is entitled to a personal relief of sh 1,520 per month. He has a life insurance policy for which he pays sh 1,200 per month and claims insurance relief at the rate of sh 3 per k£. The civil servant’s PAYE is sh 6,900.Apart from PAYE and insurance his other monthly deductions are WCPS 2% of basic salary, HELB loan sh 4,000 and cooperative shares sh 600. Calculate his:

1. Taxable income per month. 
2. Basic salary per month 
3. Net monthly pay. 

Answer 1

1. Tax= net tax + relief = 6900 + 1520 + (3/20x1200) = Sh.8600
   8600 - 6440=2160
   9680 x 0.1 = 968
   9120 x 0.15=1368
   9120 x 0.20=1824
   9120 x 0.25=2280
                          6440
    y x 0.30 = 2160
   y = 7200 
   taxable income = 7200 +(9120 x 3)+ 9680
   = 44,240
    
2. Taxable income = (1.15 of BS) + allowance
   44240 = 1.15x + 16000 - 6260
   1.15x = 34500
   x= 30,000
    
3. Total deductions = 6900 + 1200 (¹²/₁₀₀ x 30,000) + 4000 + 600
   =13,300
   Net monthly pay = 44,240 - (0.15 x 30,000) - 13,300
   =26,440