• September 28, 2023
  • Raf Peter
  • 0

Taxation is an essential component of any country’s economy, supporting public services and infrastructure development. Personal income tax is one of Kenya’s main sources of revenue for the government. It is critical for both individuals and businesses to understand how these tax rates works. In this blog article, we will go through the specifics of Kenyan personal income tax rates, allowing you to make more informed financial decisions.

Understanding Personal Income Tax.

The Income Tax Act (ITA) governs personal income tax in Kenya, which is managed by the Kenya Revenue Authority (KRA). The Income Tax Act of Kenya is a comprehensive piece of legislation that provides the legal framework for the taxation of income in the country. It is administered by the Kenya Revenue Authority (KRA) and applies to both individuals and businesses operating within Kenya’s borders.

It is a progressive tax, which means that the larger your income, the more the percentage of it you pay in taxes. The rates are divided into bands or brackets, each with its own tax rate.

Personal Income Tax Bands and Rates for Residents

  1. Monthly salary of up to Ksh 24,000: There is no tax on income in this band.
  2. Over Ksh 24,000 but not more than Ksh 12 million per year: Any income over Ksh 24,000 per month is taxed at a 10% rate.
  3. Over Ksh 12 million per year: The tax rate is 25% on income over Ksh 12 million per year.

It should be noted that tax rates can vary from year to year due to government policies and fiscal considerations. As a result, for the most up-to-date information, it’s always a good idea to verify the newest rates with the Kenya Revenue Authority or consult a tax specialist such as Frimor Safe Way Solutions.

Deductions and Tax Relief.

Kenya’s tax system allows for certain deductions and reliefs that can reduce your taxable income:

  1. Personal relief: Individuals are entitled to Ksh 2,400 per month or Ksh 28,800 per year in personal relief. This means that the first Ksh 28,800 of your annual income is exempt from taxation.
  2. Mortgage Interest relief: If you have a mortgage, you may be entitled for tax reduction on mortgage interest.
  3. Insurance Relief: If you have a life insurance policy, you can get a tax break on the premiums you pay
  4. Education Relief: Parents can claim tax credits for school fees paid on behalf of their children.

These deductions and reliefs can significantly reduce your tax liability and are worth exploring with a tax advisor.

Filing and Payment.

Individuals must file their annual tax returns for the previous tax year (1st January to 31st December) by the 30th of June each year. Failure to comply may result in penalties and interest on any unpaid taxes.

The development of internet platforms has eased the procedure of submitting taxes in Kenya. Taxpayers can now file their returns electronically through the Kenya Revenue Authority’s I Tax system at the their own comfort and using their devices such as phones and laptops so long us one is connected to internet.

Understanding Kenya’s personal income tax rates is critical for good financial planning and tax compliance. Individuals can minimize their tax payments while contributing to the country’s economic progress by understanding the applicable tax rates, deductions, and reliefs. For accurate and up-to-date tax information, it is best to consult with a tax professional or use the Kenya Revenue Authority’s services. Remember that taxes are the cost of living in a civilized society, so let us make sure we pay our fair share while benefiting from public services and infrastructure.

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