This accounting problem is solved step by step below, with detailed explanations to help you understand the method and arrive at the correct answer.
ScanSolve AI Answer
Here are the calculations for Mr. Ochieng's income tax: a) His taxable income in K£p.a. Step 1: Calculate the monthly taxable housing benefit. The housing benefit is typically 15% of the basic salary. Housing Benefit = 15\% × Ksh. 15,000 = 0.15 × 15,000 = Ksh. 2,250 Since he pays a nominal rent of Ksh. 1,250 per month, the taxable housing benefit is: Taxable Housing Benefit = Ksh. 2,250 - Ksh. 1,250 = Ksh. 1,000 per month Step 2: Calculate the total monthly taxable income. Total Monthly Taxable Income = Basic Salary + Taxable Housing Benefit Total Monthly Taxable Income = Ksh. 15,000 + Ksh. 1,000 = Ksh. 16,000 per month Step 3: Calculate the annual taxable income in Kenya Shillings (Ksh. p.a.). Annual Taxable Income (Ksh.) = Ksh. 16,000 × 12 = Ksh. 192,000 p.a. Step 4: Convert the annual taxable income to Kenya Pounds (K£ p.a.). (Note: 1 K£ = 20 Ksh.) Annual Taxable Income (K£) = Ksh. 192,00020 = K£ 9,600 p.a. His taxable income in K£p.a. is K£ 9,600. b) The amount of tax he pays per month in Kenya shillings. Step 1: Calculate the gross annual tax using the tax bands. • Band 1: 1 - 2300 K£ at 2 Ksh/£ Tax = (2300 - 1 + 1) × 2 = 2300 × 2 = Ksh. 4,600 • Band 2: 2301 - 4600 K£ at 3 Ksh/£ Tax = (4600 - 2301 + 1) × 3 = 2300 × 3 = Ksh. 6,900 • Band 3: 4601 - 6900 K£ at 5 Ksh/£ Tax = (6900 - 4601 + 1) × 5 = 2300 × 5 = Ksh. 11,500 • Band 4: 6901 - 9200 K£ at 7 Ksh/£ Tax = (9200 - 6901 + 1) × 7 = 2300 × 7 = Ksh. 16,100 • Band 5: 9201 - 11500 K£ at 9 Ksh/£ Mr. Ochieng's taxable income is 9600 K£. The amount falling into this band is: 9600 - 9200 = 400 K£ Tax = 400 × 9 = Ksh. 3,600 Total Gross Annual Tax: Gross Annual Tax = 4600 + 6900 + 11500 + 16100 + 3600 = Ksh. 42,700 Step 2: Calculate the total annual reliefs. • Personal relief: Ksh. 1,056 per month • Insurance relief: Ksh. 270 per month Total Monthly Relief = 1056 + 270 = Ksh. 1,326 Total Annual Relief = 1326 × 12 = Ksh. 15,912 Step 3: Calculate the net annual tax payable. Net Annual Tax = Gross Annual Tax - Total Annual Relief Net Annual Tax = Ksh. 42,700 - Ksh. 15,912 = Ksh. 26,788 Step 4: Calculate the net monthly tax payable. Net Monthly Tax = Ksh. 26,78812 = Ksh. 2,232.333... Rounding to two decimal places: Net Monthly Tax = Ksh. 2,232.33 The amount of tax he pays per month in Kenya shillings is Ksh. 2,232.33. That's 2 down. 3 left today — send the next one.