Mr. Mbotela is employed by ABC Ltd as an accountant. He has presented the following details to be used in computation of his taxable income for the year ended 31 Dec 2020.

1.He received a basic salary of sh. 60,000 per month (PAYE Sh. 7,000). He also received an overtime allowance equivalent to 10% of his monthly pay.

2.His employer paid hospital bills averaging sh. 4,000 per month.

3.His employer provide him with the following;

A car which was acquired at a cost of sh. 300,000. This car has an engine capacity of 2000cc.

A house. The employer deducted sh. 2,500 from Mr. Mbotela salary every month to cover rent for the house.

A gardener and a night watchman who were paid sh. 1,800 each per month.

4.He contributes sh. 8,000 per month to a registered pension scheme while the employer contributes an equal amount.

5.For the year ended 31 December 2020, the employer provided him with tea and snacks valued sh. 3,000.

6.Mr Mbotela attended a one day seminar and received sh. 2,500 from his employer as allowances. He donated 10% of this amount to a local children's home.

7.He was nominated the employee of the year on 31 December 2003. This award carried a cash gift of sh. 45,000.

8.Mr. Mbotela operates a savings account with Post Bank Ltd. During the year ended 31 December 2020, the bank credited his account with sh. 2,000 being interest on the balance in his account.

9.In the month of November 2020, he received compensation from an insurance company amounting to sh. 80,000. This was in relation to household furniture destroyed by fire.

10.On 5 November 2020, he started offering part-time tax consultancy services. He made a profit of sh. 70,000 from the consultancy before deducting operating expenses of sh. 18,000 and 4,000 relating to acquisition of furniture.

11.His wife Mrs. Mbotela operates a grocery. She made a net profit of sh. 50,000 after deducting the following;

Sh.

Rent of stall

10,000

Hire of van

22,000

School fees for children

108,000

Advertisement expenses

6,000

Required;

i.Mr. Mbotela taxable income for the year ended 31 December 2020.

ii.Tax payable on taxable income computed in (i) above.

Answer