A lady earns a basic salary of Kshs. 32,000 per month. She also receives a medical allowance of Kshs. 2,540 (non-taxable) and a house allowance of 40% of her basic salary. Using the tax brackets below

Here's a step-by-step solution:

Part (a): Determine

• a) (i) Her monthly taxable pay.

  • Basic salary = Kshs. 32,000
  • Medical allowance = Kshs. 2,540 (non-taxable)
  • House allowance = 40% of basic salary $$\text{House allowance} = 0.40 \times 32,000 = \text{Kshs. } 12,800$$
  • Taxable pay includes basic salary and taxable allowances. $$\text{Taxable pay} = \text{Basic salary} + \text{House allowance}$$ $$\text{Taxable pay} = 32,000 + 12,800 = \text{Kshs. } 44,800$$
  • Her monthly taxable pay is $\boxed{\text{Kshs. } 44,800}$.

• a) (ii) Her monthly total tax. We use the taxable pay of Kshs. 44,800 and the provided tax rates:

  • First bracket (Kshs. 10,001 - Kshs. 18,000): Amount = $18,000 - 10,000 = \text{Kshs. } 8,000$ Tax = $8,000 \times 0.10 = \text{Kshs. } 800$
  • Second bracket (Kshs. 18,001 - Kshs. 29,500): Amount = $29,500 - 18,000 = \text{Kshs. } 11,500$ Tax = $11,500 \times 0.15 = \text{Kshs. } 1,725$
  • Third bracket (Kshs. 29,501 - Kshs. 39,500): Amount = $39,500 - 29,500 = \text{Kshs. } 10,000$ Tax = $10,000 \times 0.20 = \text{Kshs. } 2,000$
  • Fourth bracket (Kshs. 39,501 - Kshs. 49,600): Remaining taxable income = $44,800 - 39,500 = \text{Kshs. } 5,300$ Tax = $5,300 \times 0.25 = \text{Kshs. } 1,325$
  • Total monthly tax (Gross tax): $$\text{Total tax} = 800 + 1,725 + 2,000 + 1,325 = \text{Kshs. } 5,850$$
  • Her monthly total tax is $\boxed{\text{Kshs. } 5,850}$.

Part (b): Calculate

• b) (i) Her net tax per month.

  • Gross tax = Kshs. 5,850 (from a(ii))
  • Personal relief = Kshs. 1,200
  • Insurance premium = Kshs. 2,500
  • Insurance relief = 15% of monthly insurance premium $$\text{Insurance relief} = 0.15 \times 2,500 = \text{Kshs. } 375$$
  • Net tax = Gross tax - Personal relief - Insurance relief $$\text{Net tax} = 5,850 - 1,200 - 375 = \text{Kshs. } 4,275$$
  • Her net tax per month is $\boxed{\text{Kshs. } 4,275}$.

• b) (ii) Her net pay per month.

  • Total gross income = Basic salary + Medical allowance + House allowance $$\text{Total gross income} = 32,000 + 2,540 + 12,800 = \text{Kshs. } 47,340$$
  • Deductions:
    • Net tax = Kshs. 4,275
    • Insurance premium = Kshs. 2,500
  • Net pay = Total gross income - Net tax - Insurance premium $$\text{Net pay} = 47,340 - 4,275 - 2,500 = \text{Kshs. } 40,565$$
  • Her net pay per month is $\boxed{\text{Kshs. } 40,565}$.