PERSONAL TAXES
Employment Income
Employment income is chargeable under “Pay As You Earn” ( PAYE ), method of deducting income tax from salaries and wages applies to all income from any office or employment. Thus “Pay As You Earn” applies to weekly wages, monthly salaries, annual salaries, bonuses, commissions, directors’ fees (whether the director is resident or non-resident) pensions paid to pensioners who reside in Kenya, where the amount from a registered pensions fund exceeds Kshs. 240,000 per annum, and any other income from an office or employment. The system applies to all cash emoluments and all credits in respect of emoluments to employees’ accounts with their employers, no matter to what period they relate.
(2) For the purposes of section 3(2)(a)(ii) “gains or profits” includes—
(a) any wages, salary, leave pay, sick pay, payment in lieu of leave, fees, commission, bonus, gratuity, or subsistence, travelling, entertainment or other allowance received in respect of employment or services rendered, and any amount so received in respect of employment or services rendered in a year of income other than the year of income in which it is received shall be deemed to be income in respect of that other year of income:
Employee Benefits
Employment Income Treatment – General
Employment income is assessable on accrual basis; that is, over the period it has been earned and become due for payment. The time the Income is received is, therefore, immaterial. Income from employment or services rendered is chargeable to tax under section 3(2)(a)(ii) of the Income Tax Act. This is expounded by section 5(2) which spells out that […]
Insurance Relief
A resident individual shall be entitled to insurance relief at the rate of 15% of premiums paid subject to maximum relief amount of Kshs. 5,000 per month (or Kshs. 60,000 per annum) if he proves that;- – he has paid premium for an insurance made by him on his life, or the life of his […]
Personal Relief
A resident individual with taxable income is entitled to a personal relief of Kshs. 1,162 per month (i.e. Kshs. 13,944 per annum). This is a uniform relief and employers are advised to automatically grant personal relief to all employees irrespective of their marital status. Individuals serving several employers qualify for personal relief from only one […]
Owner Occupied Interest
In ascertaining the total income of a person for a year of income interest paid on amount borrowed from specified financial institution shall be deductible. The amount must have been borrowed to finance either:- the purchase of premises or improvement of premises – which he occupies for residential purposes. The amount of interest allowable under the law […]
Tax Bracket Rates ( 2021 )
Tax Law increased the tax exempt amount to KShs 24,000 per month. The rate of personal relief has been increased to KShs 28,800. Table, below shows the individual rates of tax and wife’s employment, wife’s professional and wife’s self-employment income rates of tax.
Individual rates of Tax Rate in each shilling
On the first KShs. 288,000 10%
On the next KShs. 100,000 25%
On all income over KShs. 388,000 30%