TAXATION OF INCOME

LECTURE OUTLINE

 Basis of charging tax in Kenya: Section 3 of the Income Tax

Act
 Sources of taxable income
 Concept of residence and Criteria of taxing income in
Kenya.
 Taxable and non-taxable persons
 Incomes exempted from taxation
 Taxable and non taxable employment benefits
 Taxable persons and non-taxable persons
 Allowable and non allowable deductions
 Computation and remittance of tax on employment income
  Tax credits (personal and insurance reliefs )
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 INCOME TAX ACT(ITA)
SOURCES OF TAXABLE INCOME
Section 3 of the ITA states that ‘Subject to, and in accordance
with, this Act, a tax to be known as income tax shall be
charged for each year of income upon all the income of a
person, whether resident or non-resident, which accrued in or
was derived from Kenya’’.
Kenya operates a source based tax system, meaning that
income is only subject to tax in Kenya if it accrued in or was
derived from Kenya.
However, there are a few exceptions to this rule such that
income earned outside Kenya is taxable in Kenya.
In the case of employment income earned outside Kenya by a
Kenyan resident individual
In the case of business income where a Kenyan person carried
on their business partly in Kenya and partly outside Kenya.
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 Concept of Residence in taxation

 Resident and non-resident persons

Residence for tax purposes implies the physical
presence in Kenya in a particular year of income.
Tax residence has nothing to do with one’s
nationality or citizenship or domicile.
A resident person can either be an individual or
body of persons.
There are conditions for being a resident in case
of an individual and also in case of a body of
persons.
a) Resident in relation to an individual means that
the individual:
i) Has a permanent home(fixed abode) in Kenya
and was present in Kenya for any period during
the year of income under consideration; or
ii) Has no permanent home in Kenya but was
present in Kenya for a period or periods
amounting in total to 183 days or more during
the year of income under consideration ;or
iii) Has no permanent home in Kenya but was
present in Kenya for any period during the year
of income under consideration and in the two
preceding years of income for periods averaging
more than 122 days for the three years.
 
b) Resident in relation to a body of persons
means that:
i) The body is a company incorporated under
the laws of Kenya; or
ii) The management and control of the affairs of
the body was exercised in Kenya in the year of
income under consideration; or
iii) The body has been declared, by the Minister
for Finance by a notice in the Kenya Gazette, to
be resident in Kenya for any year of income.

c) Non-Resident:
 Means any person (individual or body of
persons) not covered by the above conditions
for resident.
Finance act 2021 defines permanent residence as :
1.A fixed place of business through which a business is carried on;
2.A building site, construction, assembly or installation project or any
supervisory activity, provided that the same continues for more than 183
days;
3.Provision of services including consultancy services through employees or
other personnel where those services continue for more than a period
exceeding in aggregate, 91 days in any twelve month period;
4.An installation or structure used for exploration of natural resources
provided that such activity continues for a period of 91 days or more; and
5.A dependent agent of a person acting on behalf of the principal in respect
of activities undertaken in Kenya including habitually concluding contracts
or playing a material role in the conclusion of contracts that are routinely
concluded without material modification.
The above are effective from 1st July 2021
The 2022 Finance Act has introduced the definition of a “permanent home”
to mean a place where an individual resides or which is available to that
individual for residential purposes in Kenya, or where in the opinion of the
Commissioner the individual’s personal or economic interests are closest.

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Significance of the concept of residence for Individuals

For residents, employment income arising in Kenya

and other sources outside Kenya (worldwide
employment) are taxable. For non-residents,
employment income arising only from Kenya is
taxable.
Personal relief is granted as a deduction against tax
liability while non-residents can’t claim personal
relief as a deduction from tax liability.
For resident’s pension income, the first sh.600,000
received in lumpsum is tax exempt .In case of
periodic payment ,the first sh.300,000 p.a is tax
exempt. For non-residents,the gross pension income
received for services rendered in Kenya is subject to
withholding tax of 5% as the final tax.
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Significance of the concept of residence for Individuals

 Residents pay income taxes at graduated scale rates

but non residents pay income taxes at special rates
on certain specified incomes or sources.
For residents, the rental income ,less allowable
expenses is taxed using the graduated scale for
individuals or corporation tax for a company or 10%
tax on rental income .For non-resident, the gross
rental income is subject to withholding tax of 30%
as the final tax.
Royalty income:For residents ,the gross royalties are
subject to withholding tax of 5%.For non residents,
the gross royalties are subject to withholding tax at
the rate of 20% as final tax.
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Significance of the concept of residence for Companies

Resident companies are taxed at the rate of

30% on their taxable income while
nonresident companies with a branch in
Kenya are taxed at a higher rate of 37.5%.
Non residents companies with no branch in
Kenya have withholding tax deducted at
source on all their incomes while resident
and non resident companies with branches
in Kenya have withholding tax deducted
from only their dividend and interest income.

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Income can be from employment, business,
profession, from property (e.g rent and
royalties),investment(e.g interests and
dividends),among other sources

A person whose income is taxed is either:An

individual i.e. a natural person; or a legal
person e.g a company (section 44 of ITA).
There are instances where tax on an
individual is levied on another
person(Exemptions to section 44 of ITA)
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 Exceptions to section 44 of the ITA

• 1.Section 45:Income of a married woman living with her

husband shall be deemed for tax purposes to be that of the
husband .This effectively combines the income of the two in
one assessment. However a married woman may opt to file a
separate return from that of her husband.

• 2.Section 46: The income of an incapacitated person shall be

assessed on, and the tax thereon charged on, that person in the
name of his trustee, guardian, curator(manager/overseer),
committee or receiver appointed by a court.
• Incapacitated-A lack of physical or mental abilities that results
in a person's inability to manage his or her own personal care.
• Incapacitated-Minors and adults with mental or physical
problems
 
• 3.Section 47: The income of a non-resident person
shall be assessed on, and the tax thereon charged
on, that person either in his name or in the name of
his trustee, guardian, curator or committee, or of
any attorney, factor, agent, receiver or manager.

• 4.Section 48: The income accrued to, or received

prior to the date of the death of a deceased person
which would, but for his death, have been assessed
and charged to tax on him for a year of income shall
be assessed on, and the tax charged on, his
executors or administrators for that year of income.
Taxation of Employment Income
An employee can be said to be a holder of
a public office or other appointment for
which remuneration is paid.
The remuneration is the reward or pay for
work or service rendered. It includes a
minister, civil servant, company directors,
company secretary, accountant, clerk,
engineer, and all those commonly referred
to as employees.

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 EMPLOYMENT INCOME
Gains or profits from employment or service
rendered
Include cash as well as non-cash payments.
• 1) Cash payments to employees will include:
• a) Wages, salary, leave pay, sick pay, payment in
lieu of leave, director's fees, overtime, commission,
bonus, gratuity, compensation for the termination
of any contract of employment or service etc.

• b) Cash allowances -house or rent allowance, cost of living

allowance, clothing allowance, etc
• c) Employees' private expenditure paid by employer.  
d) An amount of subsistence, travelling,
mileage, and entertainment allowance.
When these are paid to employees as mere
reimbursements (refunds) of expenses of
employer, they are not taxable
employment income.
Reimbursements (refunds) by employer
of expenses by employee are not taxable
employment income..
 
• e) An amount paid to resident person for
employment or service rendered inside or
outside Kenya if resident at the time of
rendering service.
• A resident is therefore taxed on
worldwide employment income.
2) Non-cash Employment Income will include:

i)The benefit, advantage, or facility arising from employment

(Benefits in kind) .
These come in the form of free products from where a person
works e.g free packets of milk for KCC staff,Free flour for
Unga ltd workers etc . Benefits in kind of a value not
exceeding sh.3000 per month or KShs 36,000 per annum in
aggregate are tax exempt.

(ii) Servants provided by employer, for example house servants,

cooks, watchman (day and/or night), ayah, and gardener. The
Commissioner of Domestic Taxes has quantified the value of
the benefits .
• An employee is taxed on the cost of providing the benefit or
the quantified value of the benefit, whichever is higher. If
there is no quantified value, the higher of the market value
and the cost is taken.
(iii) Services provided by employer, for
example, water, telephone, electricity,
furniture, and radio and electronic alarm
system.
 In the cases of furniture provided to an
employee by employer(house may be
furnished),the taxable amount is
considered to be 1% per month on cost of
furniture and in case of telephone, the
taxable amount is 30% of total telephone
bills
 (iv) Motor car provided by employer.

Taxed on the higher of Commissioner’s fixed scale rate

and the annual prescribed rate, which is calculated as
24% p.a. (2% per month) of initial cost of the vehicle to
the employer.
Where an employee has been provided with a hired or
leased vehicle, the taxable value of the car benefit is the
lease or hire charges.

As from 1st January 1996,the benefit of motorvehicle is

the greater of:
• a)the commissioner’s quantified benefit based on the
cylinder capacity (CC)ratings or
• b)24% p.a(2% per month) ) percentage of the initial cost
of the motor vehicle
 Housing benefits -section 5(3) of the income tax Act;

•  A housing benefit arises where an employee is housed

by the employer. The employer may own the house or
lease it from other parties.
• To determine the amount of housing benefit, the
employees are classified into six groups and the value
of the housing benefit will depend on this classification:
(i) Ordinary Employee
The higher of
• a. 15% of the total employment income
• b. market rental value and
• c. rent paid by the employer
•   LESS own contribution towards rent
(ii) Whole time service directors Whole-
time service director is a director who is
required to: -
-Devote substantially the whole of his time
to the service of the company in a
managerial or technical capacity; and
-Does not own or control, directly or
indirectly, more than 5% of the share capital
or voting power of such a company. Shares
owned by spouse or own shares in the
company are included in computing the 5%
control.
For whole time service director,
The value of the housing benefit is
The higher of:
a. 15% of the total employment income,
excluding the value of the premises,
b. market rental value and
c. rent paid by the employer
LESS own contribution towards rent

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iv) Non whole time service director,
The value of the housing benefit is
The higher of:
a. 15% of the total income, excluding the
value of the premises,
b. market rental value and
c. Rent paid by the employer.
LESS own contribution towards rent

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(v) Agricultural employees
 They are required by terms of
employment to reside on a plantation or
farm
 Taxable housing benefit is:
The higher of:
a.10% of the total employment income
b. market rental value and
c. rent paid by the employer
•   LESS own contribution towards rent
vi)Employees provided with both
accommodation and meals
– such employees include those in hotel
industry where both accommodation and
meals are provided.
-Housing benefit is determined as 20% of the
gains from employment.

N/B
If the premises are occupied for part of the
year only, the value is prorated
Exemption of housing benefit from taxation

Housing benefit is not treated as taxable where:

i) Housing is necessary due to the nature of work
of the employee e.g. caretaker of a building,
captain of a ship etc.
ii) It is for better performance of employment
by the employee e.g. doctors who resides in
hospitals.
iii) Housing is provided for security reasons e.g.
game wardens working in game parks.
Where housing is provided for reasons other than
the above, it shall be a taxable benefit.

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Loans to employees
• Fringe Benefit Tax (FBT) is payable on interest free or
low interest loan granted to employees.
• FBT is paid by the employer, whether exempted from tax
or not, at the resident corporate tax rate currently 30%.
• The benefit is the difference between actual interest
charged and the interest computed using the
Commissioner’s prescribed rate published quarterly.
• Fringe benefit tax is charged at the corporate tax
rate(30%) and paid by the employer on a monthly basis.
i.e Fringe benefits=Amount of loan (market interest rate-
low interest rate)n/12
where n is the number of months or period of the loan.
 
Example:
Mr.Otieno was granted a loan of sh.2m by his
employer on 1st august 2018 at an interest rate
of 5% p.a.The prescribed interest rate then was
15% p.a.
Calculate fringe benefit tax .
Solution
Fringe benefits=Amount of loan (market interest
rate-low interest rate)n/12
=2m(15%-5%)5/12=sh.83,333
FBT per month =FBT*Corporate tax *1/n
=83,333*30%*1/5=sh.5,000
Per diems

The first KShs 2,000 per day spent while

away on business trips is tax free.
 Dependants education

  Education fees of employee’s dependents or

relatives will not be taxed on the employees
provided the same has been taxed on the
employers(disallowed).
 For organizations that are tax exempt, school
fees will be taxed on the employees concerned
as a benefit.

• Compensation for termination of

employment
• This is a taxable benefit on the employee.
Employee share option plans (ESOPS)
• Are taxable benefits .
• Where shares are given free, the taxable benefit is based on the
prevailing market price per share (MPS).
• When shares are issued at a price lower than the market price per
share, the taxable benefit will be (MPS-issue price) X number of
shares issued.
 The 2022 finance Act changes the valuation of the benefit accrued
from employee share ownership plans (ESOPs) to the difference
between the offer price per share at the date the option is granted by
the employer, and the market value, per share on the date when the
employee exercises the option. The Act has amended the taxing point
of the benefit from ESOPs to the exercise date of the employee share
options
Limiting of benefits
• Where a benefit is enjoyed for a period of less than a year, the taxable
value of the benefit is proportionately reduced to the period enjoyed.
Tax free employment benefits

1. Expenditure on passage for expatriates

only.
This is expenditure on traveling between
Kenya and any other place outside Kenya
borne by the employer for the expatriate
employee and family.
2. Medical insurance and medical Expenses:

 Where an employer provides its employees (including

directors) and their beneficiaries (spouse & upto 4 children
whose age does not exceed 21 years) with free medical
services or free medical insurance, the value of such medical
service or insurance is not a taxable benefit on the employee.
 If employee medical scheme is non-discriminative, the value
of such medical expenses is a non-taxable benefit for ordinary
employees and whole time service directors.

• However, for the non whole time service directors the

medical benefit is limited to Sh. 1,000,000 p.a tax free.

• It is permissible to have different schemes for different

categories of employees.
Employment expenses
Any expense incurred wholly and
exclusively in the production of
employment income is not taxable.
Bona fide reimbursement of business
expenses relating to entertainment, travel,
and car expenses are not part of taxable
income
Reimbursed medical insurance or medical
expenses are not normally taxable.
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3.Gifts - (however gifts and tips arising
from employment are taxable)
 The transfer of property by way of
gifting is chargeable to capital gains tax.
 Transfer through inheritance is however
exempt from capital gains tax.
 Donations are not tax deductible in
calculating the taxable income of a
person except cash donations made to
registered charitable organisations,
exempted societies and political parties.
4.Benefits in kind whose value does not exceed Sh.
36,000 p.a. (3000 p.m).
5. The amount of contribution by an employer, on behalf
of an employee, to a pension fund or providend fund.
• 6. Employee or Dependant’s education -This
benefit is not taxable on the employee where
the employer disallows the cost for corporate
tax purposes.
7.Dowry
8.Harambee collections
9.Inheritance
10.Profit on selling isolated assets
11.Honoraria-ex gratia payments

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12.For disabled persons, the first sh.150,000
of their total income per month is exempt
from tax .
In addition, such a person is allowed to
deduct from his chargeable income any
expenses in respect of ‘home care’ and
‘personal care’ like drugs and treatment
expenses subject to a maximum of
sh.50,000 per month.
Proof of registration with the National
Council for Persons with Disability will
be required
• 13.)The monthly pension payments received
by a pensioner who has attained 65years of
age are exempt from tax.
N/B The Finance Act, 2020 has amended Paragraph 53 to
the First Schedule of the Income Tax Act thereby making
lumpsum pension paid to persons aged 65 years of age or
more taxable effective 30 June 2020.
Monthly or lump sum pension granted to
persons aged 65 years or more was exempt
from tax. However, w.e.f 30 June 2020 only the
monthly pension granted to persons who are 65
years and above will continue to be tax-exempt
but the lump sum pension will now be taxable
 14).Effective 1 January 2011,
Gratuities due to an employee is
tax free for the employee when
paid directly to a registered
pension fund by the employer.
• The tax free amount is limited to
KShs 240,000 per annum.
 
15.With effect from 2014,cost of meals
served in canteens and cafeterias operated
or established by the employer or provided
by a third party who is a registered
taxpayer (whether the meals are supplied
in the premises of the employer or the
premises of the third party) where the
value of the meal does not exceed the sum
of sh.48,000 per year per employee.
Highlights of changes introduced by finance act 2020 as
concerns employment income

The income of a registered home ownership

savings plan is now taxable
• Income from employment paid in the form of
bonuses, overtime and retirement benefits to
employees whose taxable employment income
before bonus and overtime allowances does
not exceed the lowest tax band is now taxable
Interest income earned by a depositor on
deposits of up to KES 3million to a registered
home ownership scheme is now taxable
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The following employment incomes are also not taxed
as they are exempted from taxation:
• i) Employment income of foreign embassy staff
excluding locally recruited staff.
• ii) Employment income of African Union (AU) staff,
foreign and locally recruited.
• iii) Employment income of United Nations
Organization (UNO) staff, foreign and locally recruited.
• vi) Foreign allowances paid from public funds to Kenya
officers serving abroad.
• viii) The first Sh.2000 paid to an employer per day as
an allowance while on official duty shall be deemed to
be a reimbursement and therefore not taxable
• ix) Non-cash benefits up to a maximum of Ksh. 36,000
per year
Other Income exemted from taxation
• -Income of registered pension fund or scheme
• -Income of local authorities in form of rates ,fines,penalties
• Income of amateur(non professionals) sporting associations so long as their main objective is
to foster outdoor sporting activity.
• -Income of religious bodies,charitable organizations,educational institutions and trusts-They
are only exempted if they are public in character,they are set up to relieve poverty or distress
or they are set to advance religion or education in Kenya.
• -Income of certain parastatals
However the following parastatals need to pay tax on their income according to The Tax Laws
(Amendment) Act, 2020 :effective 25th April 2020.
o Tea Board of Kenya;
• o Pyrethrum Board of Kenya;
• o Sisal Board of Kenya;
• o Kenya Dairy Board;
• o Canning Crops Board;
• o Central Agricultural Board;
• o Pig Industry Board;
• o Pineapple Development Authority;
• o Horticultural Crop Development Authority;
• o National Irrigation Board;
• o Mombasa Pipeline Board;
• o Settlement Fund Trustees;
• o Kenya Post Office Savings Bank; and
• o Cotton Board of Kenya
Tax relief
• Tax relief is any programme or incentive that
reduces the amount of tax owed by an individual or
business entity .For example insurance relief and
personal relief.
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
 The finance act 2021 has extended insurance relief to include
National Health Insurance Fund (NHIF) contributions.(effective
january 2022)
Personal relief

The amount of personal relief for a

resident person is kshs sh.2,400 per month
or sh.28,800 per year
Allowable and non allowable deductions:
• Allowable deductions are expenses
wholly and exclusively incurred by a
person in the production of income e.g
purchase of tires, repairs and maintenance
for transport businesses, etc
• Non-allowable expenses are not
commercial expenses of the business.

 
Expenses that are deductible/allowable against employment income:

• a) Mortgage interest (owner occupier interest) paid on

loan from the first 4 financial institutions specified in the
4th Schedule of the Income Tax Act to buy or improve his
residential house to the maximum of Sh.300,000 p.a (w.e.f
1/1/2017) or sh.25,000 per month.
• -A bank of a financial institution licensed under the
Banking Act,
• -An insurance company licensed under the Insurance Act,
• -A building society registered under the Building societies
Act and
• -The National Housing Corporation established under the
Housing Act
b) Amounts contributed by employee to a
registered pension , provident and individual
retirement schemes /fund.
The deductible amount is the lesser of:
• -actual amount contributed by the
employee
• -the commissioner of domestic tax’s upper
limit of sh.20,000 per month or sh.240,000
p.a
• -30% pensionable income(cash plus non-
cash payments).
Pensionable income -is the amount of pay
on which contributions are deducted.
I.e,it’s the basic salary plus taxable
allowances and taxable benefits. Its the total
taxable employment income (cash plus non-
cash payments).
c)NSSF contributions-the maximum
allowable deductions is sh.20,000 p.m or
sh.240,000 p.a
Every month, employers will calculate
and deduct tax from employee’s monthly
income. The employer is required to
deduct National Social Security Fund
(“NSSF”) before PAYE is calculated.
 A further deduction for the National
Hospital Insurance Fund (“NHIF”) is
deducted after PAYE deductions.
N/B -NHIF is a deduction after tax while
NSSF is a deduction before tax.
Where an employee is a member of a
pension scheme or provident fund and at the
same time the National Social Security Fund
(NSSF) the maximum allowable
contributions should not exceed
Kshs.20,000 per month in aggregate.
Employee club subscription and fees paid
to trade associations are not deductible
expenses on employment income-section
16(2(v) of the ITA with effect from 1.1.2021
Employees subscription to professional
bodies e.g ICPAK,LSK,etc are deductible.
Non allowable expenses/deductions
1. Personal expenditures incurred by
individuals in the maintenance of himself or
his family or for domestic purposes
2. Pension payments, annuity premiums
and contributions to unregistered
pension schemes and provident funds etc
3. Expenses not wholly and exclusively
incurred by a person in the production
of income
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Capital allowances

Capital allowances is the practice of allowing tax

payers to get tax relief on capital expenditure by
allowing it to be deducted against their annual taxable
income
These are tax incentives offered for capital
expenditures. Capital allowances are a replacement of
accounting depreciation, which is not generally an
allowable deduction in Kenya
The Capital expenditures can be incurred on :Building,
Machineries, Purchase or an acquisition of an
indefeasible right to use fibre optic cable by a
telecommunication operator and on farmworks
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Tax rates
From 1st January 2021, monthly tax bands
and tax rates are as follows:-
On the first shs.24,000 ............... ....10%
On the next shs.8,333 ................... ....25%
On all income over shs, 32,333..........30%
Personal relief for 2021 is Sh. 2,400 per
month
Minimum Taxable Income: KES 24,001.00
per month
From 1st January 2021,the annual tax bands
and tax rates are as follows:-
On the first shs.288,000 ............... ....10%
On the next shs.100,000 ................... ....25%
On all income over shs,388,000............30%
Personal relief for 2021 is KShs 28,800
annually
Minimum Taxable Income: KES 24,001.00 per
month
Income tax return
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.

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
online via i-tax. 
If you have no income to declare, you are required to file a NIL
return.
You can now file a NIL return using the new KRA M-service
App.

58
Afterfiling 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.Use the KRA Pay bill number 572572.

The Account Number is the Payment Registration number quoted

at the top right corner of the generated payment slip. 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.

59
 FORMAT OF A RETURN ON INCOME
Summary

•  

• NAME
• TASK
• YEAR OF
INCOME_________________________________________________
• SOURCE OF INCOME:
• Employment
• Cash benefits xxxx
• Non cash benefits xxxx
• Less allowable deductions against employment(NSSF,MIR etc) (xxxx)
• Taxable employment income xxxx
Gross tax (PAYE on taxable employment income) xxx
Less personal relief,insurance relief (xxx)
Net tax liability xxx

Less NHIF (xxx)

Less other deductions (xxx)
Net income xxx 
 
 Example
Kibet whose monthly taxable /chargeable pay for January
2022 is Kshs. 50,000 will have his pay as you earn (PAYE)
tax calculated as follows;-
Tax charged on chargeable pay Kshs. 50,000
First Kshs. 24,000 at 10% 2,400
Next Kshs. 8,333 at 25% 2,083
Balance 17,667 at 30% 5,300.1
PAYE before relief 9,783.35
Less Monthly Personal Relief ( 2,400)
PAYE after relief 7,383.35

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Compute net monthly salary after tax if gross salary is
sh.100,000,NHIF is 1,700 and NSSF is sh.200
Gross Salary Kshs 100,000.00
NSSF Deducted Kshs 200.00
Gross Salary after NSSF Deduction (Taxable Pay) Kshs 99,800.00

Income Brackets Taxable Pay Rate Tax

Kshs 0 - Kshs
Kshs 24,000.00 10% Kshs 2,400.00
24,000.00
Kshs 24,000.00 -
Kshs 8,333.33 25% Kshs 2,083.33
Kshs 32,333.33
Kshs 32,333.33
Kshs 67,466.67 30% Kshs 20,240.00
and above
PAYE before relief Kshs 24,723.33
Monthly relief Kshs 2,400.00
PAYE after relief Kshs 22,323.33
NHIF Deducted Kshs 1,700.00
Other Deductions Kshs 0.00
NET Monthly Salary Kshs 75,777

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Note
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.
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Quiz
A manager earns basic salary of Kshs.
30,000 per month plus other benefits of
Kshs. 15,000/= .His house rent is paid for
by employer at Kshs. 20,000 per month
under an agreement made at arm’s length
with the third party. Calculate the taxable
taxable pay and tax thereof.

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MORE EXAMPLES TO BE DONE IN
CLASS

THANK YOU

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