What is Pay As You Earn (PAYE) ?
Employee’s tax refers to that tax which required to deduct by an employer from the amount of salary or remuneration paid by employer or payable or accrue by an employer. This process of deducting or recovering tax from salary or pay of employee normally known as Pay as You Earn (PAYE).
The PAYE system originally developed in 1944 in Britain by Sir Paul Chambers. This type of tax collection and payment system, also known as “pay as you go”. It is more popular term in the United States.
How is PAYE calculated ?
1st Step: Monthly Income = R10,000.
2nd Step: Annual Income = R10,000 x 12/1 = R120,000.
3rd Step: Tax calculated on R120,000 as per tax slab rates = Rs7,533.
4th Step: PAYE payable on Monthly income = R7,533 x 1/12 = R627.75.