What is the formula for calculating PAYE and How do I calculate PAYE in Zambia? Pay As You Earn (PAYE) refers to an employer income tax withholding mechanism or an income-based student loan payment mechanism. In taxation, PAYE requires employers to withhold income tax from salaries paid to employees as an upfront payment of taxes due.

READ: Gratuity Calculation In Zambia

The employer which withholds income tax salaries in the context of Zambia is the government. In the context of student loans, PAYE is equally deducted from the salaries of individuals that have benefitted from loans the government of Zambia offers every year through the Higher Education Student Loan Board which advertises loan opportunities for students who may not manage to pay for themselves tuition fees at various of institutions of higher learning.

So, once the beneficiaries of the loans have completed their respective programs of study and have been employed either in the public or private sector, they have to pay back the loans for others to equally benefit.

The Zambia Revenue Authority (ZRA) uses the PAYE system in which money is deducted from the employee’s salary and periodically remitted to the government. Any amount that exceeds the amount of tax payable is returned to the taxpayer. If there is a difference between the tax paid and the tax actually owed, the taxpayer must replace the difference after submitting their annual document.

How PAYE is calculated in Zambia

The PAYE income tax calculation is based on the distribution of income in what is referred to as ‘the tax slab’. This basically entails that an employee with higher wages must pay more than employees with lower wages.

How I calculate PAYE in Zambia

The total taxable income of employees is divided into several levels defined in the slab (0-4,000.00 | 4,000.01-4,800.00)

  • PAYE is calculated by deducting a certain percentage from an individual’s salary in Zambia. For those who earn less than K4,000, nothing is deducted from their salary. Those whose salaries are above K4,000, it is illustrated below;
  • From K4,000.01 to K4,800 the deducted percentage is 25%
  • K4,800.01 – K6,900 the deducted percentage is 30%
  • K6,900 and above the deducted percentage is 37.5%
  • Gross Income = Base Salary + Benefits + Commissions + Other Compensation.
  • Taxable Income = Gross Income – any deductions or benefits as permitted by law of the land.
  • Taxable income collected after the second step ought to be applied to the tax slab.
  • Total PAYE Tax = marginal tax amount from the third step
  • Tax Payable = total pay as you earn

How do I calculate PAYE in Zambia Using a PAYE calculator

Step 1

The step is entering your basic salary

Step 2

Enter allowances, that is, the addition of commissions, bonuses, overtime, gratuity, and any other accrued bonus.

Step 3

The third step is entering deductions made by the employer, this can be a loan repayment or an advance.

Step 4

The final step is finding the PAYE by clicking ‘calculate’.