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If you're an employee, you probably negotiated your salary based on the gross amount (or cost to company) - which is the whole amount paid by your employer. Since income tax is deducted from this gross amount, often taxpayers don't know the net amount that will clear into their bank account each month. And this is important, for so many reasons.
SARS charges an employee tax monthly and employers must pay that amount over to SARS every month. which is called PAYE (Pay As You Earn). It is calculated based on your taxable income. Your employer keeps the PAYE from your salary and pays it over to SARS on your behalf.
This is different to your gross income and is calculated as follows:
Taxable income = Annual gross salary - Pension / Provident / RAF (limited to 27.5% of salary, limited to R 350 000) - 20% of travel allowance
Only 80% of your travel allowance is included in taxable income, so we therefore also subtract 20% to calculate this value.
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