January 29, 2022

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Meaning of Employment Income in PITA

When there is a contract between an employer and employees, the employer must remunerate the employee. The money given to the staff is referred to as employment income.
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When there is a contract between an employer and employees, the employer must remunerate the employee. The money given to the staff is referred to as employment income. In this article, I will give a detailed explanation of this term.

Meaning of employment income

Employment income means money paid to an employee by an employer for the services he or she rendered. It can also be defined as any salary, wages, fee, allowance, or other gain or profit from employment, including compensation, bonuses, premiums, benefits, or other prerequisite allowed, given or granted by any person to any temporary or permanent employee other than so much of any sums as or expenses incurred by him on the performance of his duties and from which it is not intended that the employee should make any gain or profit. In summary, employment income is the sum of money given to an employee before tax deductions.

Key Explanations

It is the sum of salary paid to an employee, commission, bonuses, benefits in kind, and several statutory allowances such as housing, feeding, and transport allowance. Any other gain and profit derived from the employment are also termed as employment income.

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Benefits in kind are not in the form of cash. The employer may offer the employee a home to stay at during his job. Or a car for transportation purposes. Such benefits that don’t involve cash are referred to as benefits in kind.

The employee must not be a permanent staff member. Remote and part-time employees receive employment income. In addition, an employee may make certain expenses for the benefit of the employer on the course of his or her duty. As long as the employee will not earn gain or profit from the expenses incurred, such spendings are added to his or her employment income.

It is charged on an actual year basis and it is based on pay as you earn (PAYE) tax system. You may read more on how to compute PAYE tax in this article.

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Conclusion

It is any income derived by an employee from his or her employer for performing the duties or any other tasks he or she was engaged in. The income is paid to remote employees, part-time and permanent staff. And it is chargeable under the PAYE system.

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