Mo’ Money, Less Problems with Techlify HRMS: A review of the 2022 income tax changes

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Techlify HRMS Payroll 2022 Configuration

Dr. Ashni Singh announced an increase in the income tax threshold by $10,000 during his budget 2022 presentation on Wednesday, January 26th and the same was published in the official gazette for February 11th, 2022 to be effective from the year of income commencing January 1st, 2022. We were all over it and updated our software calculations in a jiffy!

What does this mean?

In summary, taxpayers will be paying less tax and your employees will take home more! To expand, the periodic deductions are now as follow:

Daily$2,466
Weekly$17,308
Fortnightly$34,615
Monthly$75,000
Yearly$900,000

That is, if an employee’s monthly gross income is from $75,001 to $225,000, at least $75,000 of that is tax free and if he earns $75,000 or less, no tax is paid.

A closer look

As you know, when it comes to taxes there’s always more! Let’s have a closer look at the application of these changes. Here we talk about:

  1. Chargeable Income Calculation
  2. Tax Calculation

Chargeable Income Calculation

Chargeable or taxable income is simply that portion of the employee’s income with tax obligation. It is the employee’s salary after allowed deductions and it takes into consideration:

  1. Statutory free pay deduction
  2. National Insurance Scheme (NIS) contribution
  3. Medical and Life Insurance premiums deduction

Formula: Gross income – (statutory deduction for the period + employee’s NIS contribution + Medical and Life Insurance premiums deduction)

Details

Statutory free pay – the amount stated as the threshold for the period if income is less than or equal to the base salary. Otherwise, this is simply 1/3 of the employee’s gross income.

The base salary per period is as follows:

Daily$7,397
Weekly$51,923
Fortnightly$103,846
Monthly$225,000
Yearly$2,700,000

NIS contribution – 5.6% of the employee’s income up to $280,000 monthly and $64,615 weekly.

Medical and Life Insurance premiums deduction- up to 10% of Gross Salary or annual amount of $360,000, whichever is less.

Examples

Let’s see how this really works!

Monthly

Basic Salary: $320,000

Overtime amount: $15,000

Taxable allowances: $20,000

Taxable commission: $0

Other income: $0

Taxable income = ($320,000 + $15,000 + $20,000) – ($118,333+ $15,680)

= $355,000 – $134,013

= $220,987

Fortnightly

Basic Salary: $65,000

Overtime amount: $15,000

Taxable allowances: $20,000

Taxable commission: $0

Other income: $0

Taxable income = ($65,000 + $15,000 + $20,000) – ($34,615 + $4,480)

= $100,000 – $39,095

= $60,905

Weekly

Basic Salary: $200,000

Overtime amount: $15,000

Taxable allowances: $20,000

Taxable commission: $0

Other income: $0

Taxable income = ($200,000 + $15,000 + $20,000) – ($78,333 + $3,618)

= $235,000 – $81,951

= $153,049

Tax calculation

Now you know how much of the employee’s salary needs to be taxed, great! How much tax is due? Glad you asked!

The key to deriving the correct tax obligation is $1,800,000 (that is, the yearly deduction of $900,000 multiplied by 2). Why is this figure significant? Well, it determines everything! No, literally. I’ll explain!

Taxable income (gross income after allowed deductions) less than or equal to $1,800,000 per year, is taxed at 28% and anything above is taxed at 40%.

Let’s use our examples here as well!

Monthly

Taxable income = $220,987

$75,000 x 2= $150,000

at 28%: $150,000 x 0.28

tax = $42,000

at 40%: ($220,987 – $150,000) x 0.4

tax = $28,395

Total tax payable = $70,395

Fortnightly

Taxable income = $60,905

$34,615 x 2= $69,230

at 28%: $60,905 x 0.28

tax = $17,053

Total tax payable = $17,053

Weekly

Taxable income = $153,049

$17,308 x 2= $34,616

at 28%: $34,616 x 0.28

tax = $9,692

at 40%: ($153,049 – $34,616) x 0.4

tax = $47,373

Total tax payable = $57,065

Phew! I know, I know. There’s no simplicity with taxes. Or is there? Haven’t you heard? There’s Techlify HRMS; the payroll & HR management app that does it all— and some more! Learn more at Human Resources Management Software | Techlify Guyana and get started by contacting us at info@techlify.com.

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Techlify HRMS Paysheet Sample
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