Question

The table below shows the income tax rates for a certain year

Monthly taxable income in Ksh.	Tax rate percentage (%) in each shilling
1 - 11,180	10
11,181 - 21,714	15
21,715 - 32,248	20
32,249 - 42,782	25
Over 42,782	30

1. During the year, Moraa's monthly income was as follows:
   Basic salary Ksh 40,000
   House allowance Ksh 11,090
   Commuter allowance Ksh 7,000
   Calculate:
   • Moraa's total monthly taxable income.
   • total income tax charged on Moraa's monthly income.
2. Moraa's net monthly tax was Ksh 10,750.80.
   Determine the monthly tax relief allowed.
3. A proposal to expand the size of the first income tax band by 50% while retaining the size of the next three bands was made. The tax rates would remain as before in each band.
   Using the proposal, calculate:
   • the tax Moraa would pay in the first band. 
   • the tax Moraa would pay in the last tax band. 

Answer 1

1.  
   1. total income = BS + allowances
                         = 40,000 + 11,090 + 7,000
                         =Ksh 58 090 per month
   2. 11,189 x 10% =1,118
      10,534 x 15% =1,580.1
      10,534 x 20% = 2,106.8
      10,534 x 25% = 2,633.5
      Bal =58,090 - 42,782=15,308
      15308 x 30% = 4,592.4 + gross tax =12,030.80
                           = Ksh 12 030.80
2. relief= gross tax − net tax
          = 12,030.80 − 10,750.80
           = 1 280
3.    
   1. 11,180 x 150% x 10%=16,770 x 10% = 1,677
   2.         1 − 16,770     10%
      16,771 − 27,304     15%
      27,305 − 37,838     20%
      37,839 − 48,372     25%
             over 48,372     30%
      (58,090 − 48,372) x 30% = 2,915.40