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Taxable Income Review

The document explains taxable income, which is the income subject to taxation after deductions and exemptions. It provides examples of calculating taxable income and tax owed based on different income levels and deductions in Kenya. A table outlines the tax rates applicable to various income ranges.

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21 views3 pages

Taxable Income Review

The document explains taxable income, which is the income subject to taxation after deductions and exemptions. It provides examples of calculating taxable income and tax owed based on different income levels and deductions in Kenya. A table outlines the tax rates applicable to various income ranges.

Uploaded by

mochamacynthia2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Taxable Income and Related Math Topics - KCSE Review

Taxable Income

Taxable Income refers to the portion of your income that is subject to taxation after deductions and

exemptions have been applied.

It can be calculated as:

Gross Income - Deductions = Taxable Income

Example (Worked):

John earns a gross income of KSh 600,000 annually. He contributes KSh 60,000 to his retirement

fund and KSh 20,000 for insurance.

His employer also provides him with KSh 15,000 in benefits. Calculate his taxable income.

Solution:

1. Gross Income = KSh 600,000

2. Deductions:

- Retirement fund: KSh 60,000

- Insurance: KSh 20,000

Total Deductions = KSh 60,000 + KSh 20,000 = KSh 80,000

3. Taxable Income = Gross Income - Deductions = 600,000 - 80,000 = KSh 520,000

Taxable Income Table (Kenya Example):

| Income Range | Tax Rate |


|------------------|----------|

| Up to KSh 288,000| 10% |

| KSh 288,001 to KSh 388,000| 15% |

| KSh 388,001 to KSh 488,000| 20% |

| KSh 488,001 to KSh 588,000| 25% |

| Above KSh 588,000 | 30% |

Example Calculation:

Eunice has a gross annual income of KSh 600,000. She contributes KSh 50,000 to her pension and

KSh 20,000 for insurance.

Calculate her taxable income and the tax she owes.

Solution:

1. Gross income = KSh 600,000

2. Deductions:

- Pension contribution = KSh 50,000

- Insurance = KSh 20,000

Total deductions = KSh 50,000 + KSh 20,000 = KSh 70,000

Taxable Income = KSh 600,000 - KSh 70,000 = KSh 530,000

3. Tax Calculation:

- The first KSh 288,000 taxed at 10% = 28,800

- Next KSh 100,000 taxed at 15% = 15,000

- Next KSh 100,000 taxed at 20% = 20,000

- Remaining KSh 42,000 taxed at 25% = 10,500


Total Tax = 28,800 + 15,000 + 20,000 + 10,500 = KSh 74,300

Your Turn:

Given the same income structure (gross income of KSh 800,000, pension contribution of KSh

70,000, and insurance contribution of KSh 30,000),

calculate the taxable income and tax owed.

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