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The Ghana Revenue Authority has reviewed the rates of income tax for individuals for year 2022.
The new income tax rate will take effect from January 2022. “We are happy to inform you that, with the amendment (no. 2) of the Income Tax Act, 2021 (Act 1071), any employee (worker) who receives Ghc365 and below as monthly salary or Ghc 4,380.00 as annual salary is taxed at 0%” GRA official statement
This article will guide you on how to calculate your income tax for the month or year. Below is the income tax chart This Act amends the Income Tax Act, 2015 (Act 896) to review the rates of income tax for individuals. Also read this, Accra ranked second most expensive city in the world for property to income ratio
The table below details the new monthly income tax bands and rates generally applicable to the chargeable income of resident individuals:
The table below details the new annual income tax bands and rates generally applicable to the chargeable in come of resident individuals:
How to calculate the income tax
An income tax is a tax on individuals or entities in respect of the income or profits earned by them.
Income tax generally is computed as the product of a tax rate times the taxable income. The income tax is been calculated on your gross salary But not all your gross salary is been taxed on.
There is a tax free amount is which ¢365. For example, if your monthly gross salary is ¢1,500 then this how you calculate your income tax: First ¢365 is tax free.
So your gross pay– tax free= taxable income That’s ¢1500–¢365= ¢1,134.
So ¢1135 is the amount the income tax will be calculated on.
Next ¢110 has an income tax rate of 5% which is ¢5.5 Now we subtract the ¢110 from the taxable gross pay(¢1,135) that’s ¢1,135–110= ¢1025
Next ¢130 has an income tax rate of 10% which is ¢13 Now we subtract the ¢130 from the taxable gross pay(¢1025 that’s ¢1,025–130= ¢895 Next ¢3,000 has an income tax rate of 17.5% which is ¢525.
But you realize that our taxable income left is ¢895 which is far below ¢3,000. So we have to calculate its income tax base on the rate.
That’s 17.5/100 ×895= ¢156.625 Since there is not taxable income left, we now add all the income at each level to see how much income tax will be deducted from our monthly pay.
Total income tax= 5.5 +13 +156.6= ¢175.1 So the income tax on a gross salary of ¢1500 is ¢175.1.. You can follow the steps above with the help of the income tax chart to calculate your income tax on your monthly or annual gross salary.
Notedly that the income tax is based on your gross salary ( your income without any deductions not your net salary (take home pay) If you have any challenge in calculating your income tax, you can leave a message on the comments section for assistance.
