Your Payslip: A Breakdown of PAYE Calculations in Kenya

Your Payslip: A Breakdown of PAYE Calculations in Kenya

Your payslip provides a detailed breakdown of your earnings and deductions. In Kenya, the PAYE system dictates how much income tax is withheld from your salary by your employer. Here's a breakdown of how PAYE is calculated, using a sample basic pay of Ksh 250,000:

Step 1: Determining Taxable Income

·     Basic Pay: Ksh 250,000.00 (This is your gross salary before any deductions)

Step 2: Mandatory Deductions before Tax

·     NSSF: Ksh 2,160.00 (This is your contribution to the National Social Security Fund, a mandatory social security scheme)

Step 3: Calculating Taxable Pay

·     Taxable Pay: Ksh 247,840.00 (Basic Pay - NSSF = Taxable Income)

Step 4: Determining Income Tax

·     Income Tax: Ksh 69,136.00 (This is calculated based on the prevailing tax bands in Kenya. You can find tax calculators online or consult your employer's payroll department for details)

Step 5: Applying Tax Reliefs

·     Personal Relief: Ksh -2,400.00 (This is a standard deduction applied to all taxpayers in Kenya)

Step 6: Calculating PAYE

·     PAYE: Ksh 66,736.00 (Income Tax - Personal Relief)

[Optional Step: Rounding for Administrative Convenience]

·     PAYE (Rounded): Ksh 65,918.50 (This is a common practice for administrative ease)

Step 7: Arriving at Net Pay

·     Pay After Tax: Ksh 181,921.50 (Basic Pay - PAYE)

Step 8: Additional Deductions

·     NHIF: Ksh 1,700.00 (This is your contribution to the National Hospital Insurance Fund, a health insurance scheme)

Step 9: Applying Insurance Relief

·     Insurance Relief: Ksh -255.00 (This is a tax credit based on 15% of your NHIF contribution)

Step 10: Affordable Housing Levy

·     Housing Levy: Ksh 3,750.00 (This is a new levy introduced in 2023, calculated as 1.5% of your gross salary)

Step 11: Applying Affordable Housing Levy Relief

·     AHL Relief: Ksh -562.50 (This is a tax credit based on 15% of your Housing Levy contribution)

Step 12: Reaching Your Net Pay

·     Net Pay: Ksh 176,471.50 (Pay After Tax - NHIF + Insurance Relief - Housing Levy + AHL Relief)

Understanding Your Take-Home Pay:

This example illustrates how various deductions and tax reliefs are applied to arrive at your net or take-home pay. It's important to understand these calculations to ensure your payslip is accurate and reflects the correct deductions.

For more info. Visit us:

PAYE Calculator