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 House allowance = 0.40 × 32,000 = Kshs. 12,800 Taxable pay includes basic salary and taxable allowances. Taxable pay = Basic salary + House allowance Taxable pay = 32,000 + 12,800 = Kshs. 44,800 Her monthly taxable pay is 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 = Kshs. 8,000 Tax = 8,000 × 0.10 = Kshs. 800 Second bracket (Kshs. 18,001 - Kshs. 29,500): Amount = 29,500 - 18,000 = Kshs. 11,500 Tax = 11,500 × 0.15 = Kshs. 1,725 Third bracket (Kshs. 29,501 - Kshs. 39,500): Amount = 39,500 - 29,500 = Kshs. 10,000 Tax = 10,000 × 0.20 = Kshs. 2,000 Fourth bracket (Kshs. 39,501 - Kshs. 49,600): Remaining taxable income = 44,800 - 39,500 = Kshs. 5,300 Tax = 5,300 × 0.25 = Kshs. 1,325 Total monthly tax (Gross tax): Total tax = 800 + 1,725 + 2,000 + 1,325 = Kshs. 5,850 Her monthly total tax is 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 Insurance relief = 0.15 × 2,500 = Kshs. 375 Net tax = Gross tax - Personal relief - Insurance relief Net tax = 5,850 - 1,200 - 375 = Kshs. 4,275 Her net tax per month is Kshs. 4,275. b) (ii) Her net pay per month. Total gross income = Basic salary + Medical allowance + House allowance Total gross income = 32,000 + 2,540 + 12,800 = Kshs. 47,340 Deductions: Net tax = Kshs. 4,275 Insurance premium = Kshs. 2,500 Net pay = Total gross income - Net tax - Insurance premium Net pay = 47,340 - 4,275 - 2,500 = Kshs. 40,565 Her net pay per month is Kshs. 40,565.