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1.He owned 10,000 ordinary shares of Sh.50 each in Equity Bank Limited. During the year he recieved a dividend of Sh.2 per share. 2.His employment income includes; Salary Sh.60,000 p.m (PAYE sh.16,000p.m) Bonus sh.90,000 He is housed by the employer and the market rental value of the house is sh.10,000p.m His employer paid on his behalf life insurance premium at sh.7,000p.m The employer paid sh.20,000p.m for Mr.Kiogora registered provident fund. 3.During the year, he recieved the following interest income; Interest from Post Office Savings Bank, Sh.10,000. Interest from Fixed Deposit account(HFCK), Sh.15,000. 4.Mr,Kiogora paid a mortgage interest of sh.20,000p.m towards a loan for the purchase of his residence. 5.During the year he recieved a net rental income of Sh.35,000 6.He recieved pension from his past employment of Sh.20,000p.m. The pension scheme was registered with the Commissioner of Domestic Tax. Required: i.Total Taxable income of Mr.Kiogora. ii.Tax payable from his income. iii.Comment on any information not used in the computation of Mr.Kiogora taxable income.
51 Solution: Mr.Kiogora Total Taxable Income For the Period Ended 31/12/2012 Employment Income Basic Salary(60,000*12) 720,000 Bonus 90,000 Insurance premium(7,000*12) 84,000 Employment Income 894,000 Housing Benefit (15%*894,000)= 134,100 Higher of 134,100 Market Value = 120,000 Pensionable Income 1,028,100 Allowable Deductions: Mortgage Interest Actual Contribution 240,000 lower of (150,000) Set limit 150,000 Taxable Income 878,100 Add: Other Incomes Income from past employment (240,000-180,000) 60,000 Rental Income 35,000 Total Taxable Income 973,100 Mr. Kiogora Tax Liability 121968*10% = 12197 114912*60% = 68947.2
52 506396*30% = 151918.8 G.T.L 233,063 Less: P.A.Y.E ( 192,000) Personal Relief (13,944) Insurance Relief (12,600) N.T.L 14,519 Notes: Dividend income recieved from Equity Bank Limited is a qualifying dividend with withholding tax of 5% which is final. The income will not be subjected to further taxation. Interest from Post office Savings bank is tax exempt. Interest from HFCK has a withholding tax of 15% which is final. It is taxed at the source. The first sh.180,000 of income recieved from a pension scheme is exempted from taxation. Any excess amount recieved is therefore taxed. Employers contribution to a registered fund is a non-taxable benefit and is therefore not included in the above computation. Insurance relief is 15% of the premiums paid and it reduces tax liability of an individual. Incomes recieved from other sources besides employment are added up after computation of taxable income, they come at the end of the computation to give us total taxable income.
53 6.4 Lecture Activity Mr John Wesonga, a Kenyan, migrated to Canada in 2000. In December 2009, he was offered a job by the company based in Nairobi Kenya which he accepted. The employment commenced on 1 January 2010. The following details relate to his salary and benefits for the year 31 december 2010.