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Deductions for personal income tax, the amount of tax to be paid... are clearly displayed through the method of calculating PIT (personal income tax). If you don't know how to calculate personal income tax, you should refer to the calculation method in the article below by Mytour.
Personal income tax for 2019
1. Excel Formula for Calculating PIT
Formula (1): PIT to be paid = Taxable Income x Tax Rate
Where:
- Formula (2): Taxable Income = Gross Income - Deductions
- Formula (3): Taxable Income = Total income - Exempted Amounts
Note:
* Exempted amounts include:
- Personal deduction: 9 million/month (for taxpayers), 3.6 million/month (for each dependent)
- Contributions to charity, promotion of education, humanitarian aid
- Contributions to insurance, voluntary retirement fund: 8% for Social Insurance, 1.5% for Health Insurance, 1% for Unemployment Insurance
* Exempted amounts from salary, wages
- Salary, wages paid higher due to night shifts, overtime work
- In case of overtime on regular days, individuals will be paid 60,000 VND/hour for taxable income exempted 20,000 VND/hour.
- Organizations, individuals paying wages must prepare a list specifying overtime hours, night shifts.
- If there are incomes such as lunch allowance, phone allowance, mid-shift meals ... they are also exempted from taxation.
* Progressive tax rates
2. Steps to calculate PIT
Once you grasp the general formula for tax calculation, you can determine the tax amount you need to pay by following these steps:
- Step 1: Calculate total income
- Step 2: Calculate exempted amount
- Step 3: Calculate taxable income (following formula (3) guidance)
- Step 4: Calculate deductions
- Step 5: Calculate taxable income (following formula (2) guidance)
- Step 6: Calculate the personal income tax amount to be paid (following formula (1) guidance)
3. Methods of PIT Calculation
There are 3 methods for calculating personal income tax, depending on the individual, different methods will be applied:
- Calculated based on progressive tax rates: Applicable to individuals residing under labor contracts with a minimum term of 3 months.
- 10% deduction: Applicable to individuals under labor contracts with a maximum term of 3 months or without a contract.
- 20% deduction: Applicable to non-residents (foreigners)
* Summary table of progressive tax rates
* Formula for calculating personal income tax
* Tracking table for personal income tax deductions
* Guide table for calculating tax based on progressive tax rates (Simplified tax calculation)
Where: 0.25 million VND; 0.75 million VND; 1.95 million VND ... are calculated in the summary table of progressive tax rates
4. Example of PIT Calculation
Ms. A earns 37 million VND/month, contributes 8% for social insurance, 1% for unemployment insurance, 1.5% for health insurance. Currently, Ms. A is supporting a child under 18 years old for schooling. So, how much personal income tax does Ms. A need to pay?
Solution:
* Since Ms. A has no exempted amounts:
- Ms. A's taxable income = 37 million VND.
* Ms. A's deductions for personal income tax include:
As per regulations:
- Personal deduction for Ms. A is 9 million VND/month or 108 million VND/year.
- Dependent deduction for 2 children: 3.6 million VND x 2 = 7.2 million VND/month
- Insurance contribution = 37 million VND x (8% + 1.5% + 1%) = 3.885 million VND
Therefore, the deducted amount is 9 + 7.2 + 3.885 = 20.085 million VND
* Taxable income amount = 37 - 20.085 = 16.915 million VND
The personal income tax to be paid is:
* Method 1: Calculate tax based on progressive tax rates
- Tier 1: Income up to 5 million VND, with a tax rate of 5%: 5 million x 5% = 0.25 million VND
- Tier 2: Income over 5 to 10 million VND, with a tax rate of 10%: (10 - 5 million) x 10% = 0.5 million VND
- Tier 3: Income over 10 to 18 million VND, with a tax rate of 15%: (16.915 - 10 million) x 15% = 1.03725 million VND
Therefore, the personal income tax Ms. A needs to pay in one month is 0.25 + 0.5 + 1.03725 = 1.78725 million VND
* Method 2: Calculate tax due using the simplified method
Since Ms. A's taxable income for the month is 16.915 million VND, she falls into tier 3. Therefore, Ms. A's tax payment is 16.915 million VND x 15% - 0.75 million VND = 1.78725 million VND.
Above is the method to calculate PIT from salary, wages, which you can apply to easily determine how much personal income tax you need to pay monthly, annually.
5. Calculate PIT Online
In addition to the manual calculation method above, you can easily calculate personal income tax online, providing you with the tax amount you need to pay monthly/yearly.
- Step 1: Access the online tax calculation website HERE.
- Step 2: If you want to calculate monthly tax, enter complete information into A. Monthly like monthly income, insurance premium, number of dependents. If you want to calculate annually, enter into B. Yearly.
- Step 3: The result will be displayed below quickly.
Nowadays, you don't need to go to the tax office to register for income tax, you can register on the spot using PIT - Personal Income Tax registration software. With a user-friendly interface, easy to use, just 5 minutes to get used to it, you can use the software effectively.
