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Bi-weekly tax series: How to calculate my personal income tax

Posted 22 January 2018 under TaxTim's Blog

How to calculate my personal income tax

Personal Income Tax (PIT) is a direct tax levied on income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate.

Personal income tax is applicable to total taxable income of an Individual and all individuals are taxed at progressive marginal rates over a series of income brackets. The tax year runs from 1 March to 28 February every year.  Individual tax returns for the majority of people are due on 30 June each year.  Individuals that have income other than salaries may need to register for provisional tax and their returns will be due on 30 September each year.

Income for personal income tax purposes may include the following:

  • Remuneration (income from employment), such as, salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits
  • Profits or losses from a business or trade
  • Income or profits arising from an individual being a beneficiary of a trust
  • Director’s fees
  • Investment income, such as interest and foreign dividends
  • Rental income/losses from property
  • Income from royalties
  • Annuities
  • Pension income

The above amounts determine the amount of gross remuneration for tax purposes.

Certain contributions and premiums are allowed as a deduction against the above gross remuneration in order to derive the balance of remuneration which is used to calculate the personal income tax/employees tax.

Some of the most common deductions allowed against gross remuneration are as follows.  Please note that the total deductions listed below may not exceed N$40,000 in a year of assessment:

  • Contributions to any pension fund, provident fund or any retirement annuity fund.
  • Contributions to study policies for your child/stepchild
  • Current premiums paid by the employee under any policy of insurance for education purposes.

The balance of remuneration from which employees tax/ personal income tax is calculated, is derived by deducting the above contributions/premiums from the gross remuneration received.

Other deductions are also allowed but we will deal with this in another article.

Tax is calculated from the balance of remuneration as follows:

MIN

 MAX

 BASIC

ABOVE

             0

     50,000

0

0%

     50,000

   100,000

Nil

18%

   100,000

   300,000

    9,000

25%

   300,000

   500,000

  59,000

28%

   500,000

   800,000

 115,000

30%

   800,000

 1,500,000

 205,000

32%

 1,500,000

 

 429,000

37%

 

 

For example, if a person’s balance of remuneration for the tax year is N$89,000, this person will fall within the second income bracket of N$50,001 – N$100,000. To the extent that the N$89,000 exceeds N$50,000 tax will be charged at 18% which will give as an annual tax of N$7,020.

Assuming the person’s balance of remuneration for the tax year is N$950,ooo this person will fall within the income bracket of N$800,000 – N$1,500,000. To the extent that the N$950,000 exceeds N$800,000 tax will be charged at 32% and a basic mount of N$205,000 will be added on, which will give as an annual tax of N$253,000.

 You can also make use of our free income tax calculator on our TaxTim website.



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