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Taxable income

Taxable income is the amount of income that is subject to tax, after making all deductions
and exemptions. Taxable income is calculated by adding up all sources of income,
excluding non-taxable items, and subtracting deductions. Allowable deductions are
payroll deductions that are excluded from tax under state revenue guidelines. Since they
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are deducted prior to tax calculations, they lower the employee’s taxable income hence,
increase his or her take-home pay. For Tanzanian public employees, contributions made
to the social security funds are regarded as non-taxable deduction.
Net pay calculations
Net pay is obtained after deducting all required deductions from the gross salary. This
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is the take home pay. The computation of net pay requires the following steps:
(a) Compute Basic pay;
(b) Compute Gross pay;
(c) Compute required deductions; and
(d) Compute Net pay.
Example 3.5

Mr. Jumanne Mpimbi is an employee receiving a basic salary of TZS 780,000, per
month. He is also entitled to the following allowances:
(a) Meal allowance of TZS 10,000 per day;
(b) Transport allowance TZS 6,000 per day;
(c) NHIF deductions: 3 per cent of the basic salary; and
(d) Rent assistance of 10 per cent of the basic salary.
Average working days per month is 22 days.
During the month of March 2024, he took salary advance of TZS 150,000. Mr.
Jackson is to contribute 1 per cent of gross salary for development levy, 10 per
cent of basic salary for NSSF and 2 per cent of basic salary for life insurance
policy.

PAYE tax is payable as:

Monthly income Tax rate
Salary up to 450,000 NIL
Salary above 450,000 up to 10% of the amount in excess of TZS 450,000
850,000
Salary above 850,000 TZS 40,000 plus 15% of the amount in excess

of TZS 850,000
Required: Determine Mr. Jumanne’s net pay for March 2024.

Student’s Book Form Five
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