What is Income Tax?

Income tax is a direct tax that is imposed on income derived from Business, Employment, Rent, Dividends, Interests, Pensions among others.

Methods of collecting Income Tax include:

• Pay As You Earn (PAYE)
• Withholding Tax
• Installment Tax
• Advance Tax
• Turnover Tax
• Capital Gains Tax

Individual Income Tax

Individual Income Tax is charged for each year of income on all the income of a person, whether resident or non-resident, which accrued in or was derived from Kenya.

Individual Tax Bands and Rates

With effect from 1st July, 2023

Personal Relief of Kshs. 28,800 per annum (Kshs. 2,400 per month).

Taxation for Non- Resident's Employment Income

Any amount paid to Non-Resident individuals in respect of any employment with or services rendered to an employer who is resident in Kenya or to a permanent establishment in Kenya is subject to income tax charged at the prevailing individual income tax rates.

Non-Residents are however not entitled to any personal relief.

How do I file for Individual Income Tax Returns?

An individual income tax return is a declaration of income earned by an individual within a particular year.

Every individual with a KRA PIN is required to file this return every year regardless of whether they earned an income or not.

You can file your Individual Income Tax Returns for a particular year of income, anytime between 1st January to 30th June of the following year.

Submission of income tax returns is an online process done via iTax.

Here is a quick and easy to follow step by step guide on how to file your income tax returns with Employment income only.

 If you have no income to declare, you are required to file a NIL return on the iTax portal. 

You can also now file a NIL return using the new KRA M-service App.

How do I pay Individual Income Tax?

After filing the return online via iTax, generate a payment slip and present it at any of the appointed KRA banks to pay the tax due.

You can also pay via Mpesa using the KRA Paybill number 572572. The Account Number is the Payment Registration number quoted at the top right corner of the generated payment slip.

What is the penalty for late filing and paying?

Date: Individual Income Tax Returns should be filed on or before 30th June of the following year.

Penalty on late filing: Whichever is higher between, 5% of the tax due or Kshs. 2,000.

Penalty on late payment: 5% of the tax due and a late payment interest of 1% per month on the unpaid tax until the tax is paid in full.

Tax Relief

What is Tax Relief?

A tax relief is an incentive that reduces the amount of tax that a person has to pay. 

What are the types of Tax Reliefs in Kenya?

• Personal relief:

Every resident individual is entitled to a personal relief of Ksh. 28,800 per annum (Kshs.2,400 per month) with effect from 25th April, 2020.

• Insurance relief:

Every resident individual is entitled to an insurance relief of 15% of the amount of premiums paid for self, spouse or child. However, it shall not exceed Kshs. 60,000 per annum.

Insurance relief applies to the following policies;

• Life Insurance
• Education Policy with a maturity period of at least ten years
• Health Insurance

What if I am exempt from Individual Income Tax?

You are still required to file returns and enter a valid Exemption Certificate Number.

Sources

Kenya Revenue Authority (KRA)