Payroll Deductions Tables - Income tax deductions (BC) PART5

Additional information about payroll deductions

Deducting tax from income not subject to CPP contributions or EI premiums

We have built the tax credits for CPP contributions and EI premiums into the federal and provincial tax deductions tables in this guide. However, certain types of income, such as pension income, are not subject to CPP contributions and EI premiums. As a result, you will have to adjust the amount of federal and provincial income tax you are deducting.

To determine the amount of tax to deduct from income not subject to CPP contributions or EI premiums, use the Payroll Deductions Online Calculator, available at www.cra.gc.ca/pdoc. On the "Salary calculation" and/or on the "Commission calculation" screen, go to Step 3 and select the "CPP exempt" and/or "EI exempt" option before clicking on the "Calculate" button.

Step-by-step calculation of tax deductions

You can use the following step-by-step calculations to calculate the tax deductions for any employee or pensioner who earns more than the maximum amounts included in the tax deductions tables.

The example shows you how to determine the amount of tax to deduct from all income.

However, if you design your own payroll program or spreadsheets to calculate tax deductions, do not use either of these calculations. Instead, go to Publication T4127, Payroll Deductions Formulas for Computer Programs.

Example Tax to deduct for all income

This example applies to a person who earns $1,100 weekly and contributes $80 to a registered retirement savings plan (RRSP).

This person claims the basic personal amount.

Calculate annual taxable income

Description	Sub-amounts	Amounts
(1)   Gross remuneration for the pay period (weekly)		$1,100.00
(2)   Minus
the other amounts authorized by a tax services office	0.00
the RRSP contributions*	80.00	−(80.00)
* This amount has to be deducted at source.
* Note If you have an employee you paid by commission, subtract the total expenses reported on Form TD1X from the gross remuneration reported on Form TD1X if applicable.
(3)   Net remuneration for the pay period (line 1 minus line 2)		$1,020.00
(4)   Annual net income ($1,020 × 52 weeks)		$53,040.00
(5)   Minus the annual deduction for living in a prescribed zone, reported on the federal Form TD1		n/a
(6)   Annual taxable income (line 4 minus line 5)		$53,040.00