The Kenya Revenue Authority (KRA) has introduced important amendments to PAYE computation under the Tax Laws (Amendment) Act, 2024, effective December 27. These changes aim to streamline tax compliance and reduce the tax burden for employees. Here’s a breakdown of the key updates:
1. New Deductibles
The following contributions are now deductible when calculating taxable employment income:
- Affordable Housing Levy as per the Affordable Housing Act, 2024.
- Post-retirement medical fund contributions, up to Kshs. 15,000 per month.
- Social Health Insurance Fund (SHIF) contributions.
- Mortgage interest, capped at Kshs. 360,000 per year (Kshs. 30,000 per month).
- Contributions to registered pensions or provident funds, up to Kshs. 360,000 per year (Kshs. 30,000 per month).
2. Ceased Tax Reliefs
The following reliefs will no longer apply:
- Affordable Housing Relief.
- Post-Retirement Medical Fund Relief.
3. Exclusions in Gains and Profits from Employment
Certain benefits are excluded from taxable gains and profits, including:
- Benefits valued below Kshs. 60,000 per year (Kshs. 5,000 per month).
- Meal allowances capped at Kshs. 60,000 per year (Kshs. 5,000 per month).
- Gratuity or similar payments up to Kshs. 360,000 per year for pension contributions.
Impact on Employers and Employees
These changes are likely to impact December’s payroll processing due to the effective date of December 27. Employers must decide whether to process payroll before or after the effective date, influencing both the timing and amount of salaries.
From January 2025 onward, employees can look forward to reduced tax burdens and higher take-home pay due to these new provisions.
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