WHAT IS INCOME TAX?
INCOME TAX is a tax charged by the government directly on income, especially an annual on personal income.
GROSS SALARY/INCOME - The amount of money that an employee earns for a specified period (usually a month or a year).
ALLOWANCES - The portion of the gross salary that is NOT charged a tax by the government.
TAXABLE INCOME - The portion of the gross salary that is taxed by the government.
TAX - The amount of an employee's gross salary that will be paid to the government.
NET SALARY/INCOME - This is also referred to as an employee's take - home salary. This is the amount of the employee's gross income that they actually receive after taxes are deducted.
Gross annual Income = Gross Monthly Income
Ade has a wife so he gets the $1,500 wife allowance. He has 3 children so he gets the child allowance of $500 thrice.
Taxable Income = Gross Income – Total Allowances (This is usually calculated for a year)
When determining the amount of taxes paid we have to remember that taxes can ONLY be charged on TAXABLE INCOME (hence the name).
The tax rate is 15% of taxable income
Net Income = Gross Income – Taxes Paid
Monthly Net Income