Latest Personal Income Tax Calculation Method from Salary under 2024 Labor Law
In a volatile business environment, mastering tax and insurance regulations is a vital factor for every HR and accounting department. Beyond mere legal compliance, businesses today need a comprehensive strategy to optimize payroll funds. To better understand how to build a sustainable and legally compliant salary structure, you can refer to the in-depth article on Effective Salary & Benefits Cost Management Under Labor Law 2024: A Strategic Approach for Businesses. This is a valuable resource to help businesses operate efficiently and save costs.
Calculating personal income tax (PIT) from salaries and wages is a mandatory obligation for employees and a withholding responsibility for employers. In 2024, although there have been no major changes to family deduction levels, documents guiding the implementation of the Labor Law and the Law on Personal Income Tax still require absolute precision in calculations to avoid risks of administrative penalties.
So, how is the current PIT calculation formula determined? How can you correctly determine taxable income? This article will provide a detailed, step-by-step guide so you can confidently apply it to your monthly payroll.
General Formula for Personal Income Tax Calculation
According to current regulations, the PIT amount that an employee must pay is calculated using the formula:
PIT payable = Taxable income x Tax rate
Where taxable income is determined by:
Taxable income = Assessable income – Deductions
1. Determining assessable income
Assessable income is the total income from salaries and wages that an employee receives from an employer, including:
- Basic salary and wages under the contract.
- Allowances and subsidies (excluding tax-exempt items as regulated, such as hazardous work allowances, uniform allowances within limits, lunch allowances not exceeding 730,000 VND/month…).
- Bonuses (monthly, quarterly, annual, holiday bonuses).
- Other monetary or non-monetary benefits (such as life insurance, membership fees…).
2. Family deductions
This is an important part that helps reduce the tax burden for employees. Deductions include:
- Self-deduction: 11 million VND/month (132 million VND/year).
- Dependent deduction: 4.4 million VND/person/month.
- Mandatory insurance contributions: Social insurance, health insurance, unemployment insurance (not exceeding the prescribed ceiling).
- Charitable, humanitarian, and educational contributions.
Progressive Tax Table (for resident individuals with labor contracts of 03 months or more)
PIT is applied according to a partially progressive table, meaning the higher the income, the higher the tax rate. Below is the detailed tax rate table:
- Level 1: Taxable income up to 5 million VND/month – Tax rate: 5%
- Level 2: Taxable income over 5 million to 10 million VND/month – Tax rate: 10%
- Level 3: Taxable income over 10 million to 18 million VND/month – Tax rate: 15%
- Level 4: Taxable income over 18 million to 32 million VND/month – Tax rate: 20%
- Level 5: Taxable income over 32 million to 52 million VND/month – Tax rate: 25%
- Level 6: Taxable income over 52 million to 80 million VND/month – Tax rate: 30%
- Level 7: Taxable income over 80 million VND/month – Tax rate: 35%
Illustrative Example of PIT Calculation in 2024
Suppose employee A has a gross salary of 25,000,000 VND/month. Employee A has 1 dependent and pays mandatory insurance on the 25 million salary (assuming the insurance contribution rate is 10.5% on the base salary or actual salary depending on company regulations).
Step 1: Calculate deductions
- Self-deduction: 11,000,000 VND.
- Dependent deduction: 4,400,000 VND.
- Mandatory insurance (10.5%): 2,625,000 VND (assuming the contribution level is 25 million).
- Total deductions: 11,000,000 + 4,400,000 + 2,625,000 = 18,025,000 VND.
Step 2: Calculate taxable income
Taxable income = 25,000,000 – 18,025,000 = 6,975,000 VND.
Step 3: Apply the progressive tax table
- Level 1 (up to 5 million): 5,000,000 x 5% = 250,000 VND.
- Level 2 (remaining amount: 1,975,000): 1,975,000 x 10% = 197,500 VND.
- Total PIT payable: 250,000 + 197,500 = 447,500 VND/month.
Important Notes for Businesses in 2024
To ensure legal compliance and optimize costs, business owners and accountants need to note:
- Review dependent records: Ensure that dependent registration records are complete and updated at the time they arise to avoid being rejected during tax finalization.
- Distinguish between assessable income and tax-exempt income: Understanding which allowances are tax-exempt will help significantly reduce tax costs for employees without increasing business costs.
- PIT finalization: Businesses are responsible for performing tax finalization on behalf of authorizing employees within the prescribed deadline (usually the first quarter of the following year).
Calculating PIT is not just about dry numbers; it directly affects the interests of employees and the reputation of the business. We hope this article has provided a clear view of the latest PIT calculation method under the 2024 Labor Law. Always stay updated with the latest legal documents to ensure your business operates safely and professionally.