KRA Announces Changes to PAYE Computation, Affecting Deductible Contributions

The Kenya Revenue Authority (KRA) has issued guidance regarding December 2024 payroll processing in view of the Dec 27th, 2024 effective date of the Tax Laws (Amendment) Act.

The authority says the provisions on allowable deductions apply to the entire month, which implies that there is no expectation of prorating the application given the fact that over the first 26 days of the month, the Tax Laws (Amendment) Act 2024 was not in force.

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KRA, through a notice publicized on their website, announced several changes which include the amounts deductible in determining the taxable employment income such as that for Affordable Housing Levy pursuant to Affordable Housing Act, 2024, Contribution to a post-retirement medical fund subject to a limit of Kshs. 15,000 per month.

Other changes announced by the commission include the contributions made to the Social Health Insurance Fund (SHIF), Mortgage interest, not exceeding Kshs. 360,000 per year (Kshs. 30,000 per month) and the contribution made to a registered pension or provident fund or a registered individual retirement fund up to a limit of Kshs. 360,000 per year (Kshs. 30,000 per month).

However, gains and Profits from employment shall not include:

• The value of a benefit, advantage, or facility granted in respect of employment, where the aggregate value is less than Kshs. 60,000 per year (Kshs. 5,000 per month).
• The first Kshs. 60,000 per year (Kshs. 5,000 per month) on the value of meals provided by an employer.
• An amount not exceeding Kshs. 360,000 paid by an employer as gratuity or similar payment in respect of employment or services rendered for each year of service paid into a registered retirement pension scheme.

With the announced changes, the commission is still committed to ensuring support to all persons in their tax compliance journey, as they aim to improve their service to the people of Kenya.