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Mr. Kobe is a civil servant with a monthly salary of Ksh. 21,200, house allowance of Ksh. 12,000, commuter Ksh. 1,100, and medical allowance Ksh. 2,000. His personal relief is Ksh. 1,240. Calculate hi

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2 parts
a

Ksh 36,300\text{Ksh } 36,300

a(ii)

Ksh 5,030\text{Ksh } 5,030

Ksh 24,600\text{Ksh } 24,600

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18. Mr. Kobe is a civil servant who earns a monthly salary of Ksh. 21,200. He has a house allowance of Ksh. 12,000 per month, other taxable allowances are commuter Ksh. 1,100, medical allowance Ksh. 2,000. He is entitled to a personal relief of Ksh. 1,240 per month. Using the income rates below, solve the questions that follow.

Income in Ksh. per monthRates in %
1 - 8,40010
8,401 - 18,00015
18,001 - 30,00020
30,001 - 36,00025
36,001 - 48,00030
Above 48,00035

Part a· 2 steps

i) His monthly taxable income.

  1. Identify all taxable income components.

    Monthly salary = Ksh. 21,200
    House allowance = Ksh. 12,000
    Commuter allowance = Ksh. 1,100
    Medical allowance = Ksh. 2,000 (Assuming this is taxable as per the student's initial calculation which was marked correct).

  2. Calculate the total monthly taxable income.

    Taxable Income=Salary+House Allowance+Commuter Allowance+Medical Allowance\text{Taxable Income} = \text{Salary} + \text{House Allowance} + \text{Commuter Allowance} + \text{Medical Allowance} Taxable Income=21200+12000+1100+2000\text{Taxable Income} = 21200 + 12000 + 1100 + 2000 Taxable Income=36300 Ksh\text{Taxable Income} = 36300 \text{ Ksh}

    His monthly taxable income is Ksh 36,300\boxed{\text{Ksh } 36,300}.

Part a(ii)

Ksh 5,030\text{Ksh } 5,030

Net tax (PAYE)

  1. Calculate the tax for each income band based on the taxable income of Ksh.

    36,300.

    • First band (1 - 8,400):
    8400×10%=8400×10100=840 Ksh8400 \times 10\% = 8400 \times \frac{10}{100} = 840 \text{ Ksh}
    • Second band (8,401 - 18,000):
    (18000−8400)×15%=9600×15100=1440 Ksh(18000 - 8400) \times 15\% = 9600 \times \frac{15}{100} = 1440 \text{ Ksh}
    • Third band (18,001 - 30,000):
    (30000−18000)×20%=12000×20100=2400 Ksh(30000 - 18000) \times 20\% = 12000 \times \frac{20}{100} = 2400 \text{ Ksh}
    • Fourth band (30,001 - 36,000):
    (36000−30000)×25%=6000×25100=1500 Ksh(36000 - 30000) \times 25\% = 6000 \times \frac{25}{100} = 1500 \text{ Ksh}
    • Fifth band (36,001 - 48,000): The remaining income is 36300−36000=30036300 - 36000 = 300 Ksh.
    300×30%=300×30100=90 Ksh300 \times 30\% = 300 \times \frac{30}{100} = 90 \text{ Ksh}

  2. Calculate the total gross tax.

    Gross Tax=840+1440+2400+1500+90\text{Gross Tax} = 840 + 1440 + 2400 + 1500 + 90 Gross Tax=6270 Ksh\text{Gross Tax} = 6270 \text{ Ksh}

  3. Calculate the Net Tax (PAYE) by subtracting the personal relief.

    Personal relief = Ksh. 1,240.

    Net Tax (PAYE)=Gross Tax−Personal Relief\text{Net Tax (PAYE)} = \text{Gross Tax} - \text{Personal Relief} Net Tax (PAYE)=6270−1240\text{Net Tax (PAYE)} = 6270 - 1240 Net Tax (PAYE)=5030 Ksh\text{Net Tax (PAYE)} = 5030 \text{ Ksh}

    The Net Tax (PAYE) is Ksh 5,030\boxed{\text{Ksh } 5,030}.

    b) In addition to the PAYE, the following deductions were made. Ksh. 250 for NHIF, Ksh. 120 service charges, he repays a loan at sh. 4,500 and contributes towards savings at sh. 1,800 every month. Calculate his net salary per month.

  4. Calculate the total deductions.

    Total deductions = PAYE + NHIF + Service charges + Loan repayment + Savings contribution

    Total Deductions=5030+250+120+4500+1800\text{Total Deductions} = 5030 + 250 + 120 + 4500 + 1800 Total Deductions=11700 Ksh\text{Total Deductions} = 11700 \text{ Ksh}

  5. Calculate the net salary.

    Net salary = Taxable Income - Total Deductions

    Net Salary=36300−11700\text{Net Salary} = 36300 - 11700 Net Salary=24600 Ksh\text{Net Salary} = 24600 \text{ Ksh}

    His net salary per month is Ksh 24,600\boxed{\text{Ksh } 24,600}.

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