Question

The table below shows income tax rates

Monthly income	Tax Rate
(Kshs)	(%)
Up to 9680	10
9681 – 18800	15
18801-27920	20
27921-37040	25
37041 and above	30

Omari’s monthly taxable income is Ksh. 24200

1. Calculate the tax charged on Omari’s monthly earnings. 
2. Omari is entitled to the following tax relief of 15% of the premium paid.
   Calculate the tax Omari pays each month if he pays a monthly insurance premium of Ksh. 2400 
3. During a certain month, Omari received additional earnings which were taxed at 20% each shilling. Given that he paid 36.3% more tax that month, calculate the percentage increase in his earning.

Answer 1

1. Calculate the tax charged on Omari’s monthly earnings. 
   Tax on 1st ksh 9680 = 9680 x 10/100 = kshs. 968
   Tax on 2nd kshs. 9120 = 9120 x 15/100= kshs 1368
   Tax on rem kshs. 5400 = 5400 x 20/100= ksh 1080
   Total tax = 968 + 1368 + 1080 = kshs. 3416
2. Omari is entitled to the following tax relief of 15% of the premium paid.
   Calculate the tax Omari pays each month if he pays a monthly insurance premium of Ksh. 2400 
   Tax paid= 3416-(1056 + 2400 x 15/100)
   = kshs. 2000
3. During a certain month, Omari received additional earnings which were taxed at 20% each shilling. Given that he paid 36.3% more tax that month, calculate the percentage increase in his earning. 
   Increase in tax paid = 2000 x 36.3= kshs. 726
   Increase in earnings= kshs. 726 x 100/20= ksh. 3630
   % increase = 3630 x 100
                            24200