KRA Issues Notice Over PAYE Deduction Changes and Start Date of Enforcement

The Kenya Revenue Authority (KRA) has announced plans to enforce the Tax Laws (Amendment) Act, 2024 which changes the computation of the Pay As You Earn (PAYE).

In a notice dated Thursday, December 12, the taxman revealed that the new changes would take effect on December 27, 2024.

PAYE Computation Changes

As passed in the Tax Laws (Amendment) Act, taxable income is set to change following the move to make certain contributions such as the Affordable Housing Levy tax deductible.

These changes will see employed Kenyans take more money home at the end of the month.

The amount deductible in determining the taxable income also includes the Social Health Insurance Fund (SHIF) contributions and contributions to a post-retirement medical fund subject to a limit of Ksh15,000 per month.

"Amount deductible in determining the table employment income includes mortgage interest, not exceeding Ksh360,000 per year "Ksh30,000 per month), upon money borrowed by a person from one of the first six financial institutions specified in the Fourth Schedule to the Income Tax Act, to purchase or improve premises occupied by the person for residential purposes," read the notice in part.

"It also includes contributions made to a registered pension or provident fund or a registered individual retirement fund up to a limit of Ksh360,000 per year (Ksh30,000 per month."

Meanwhile, KRA also informed employers that Affordable Housing Relief and the Post-Retirement Medical Fund Relief would cease to exist.

On the other hand, KRA also clarified payments that shall be excluded from gains and profits from employment.

This includes the first Ksh60,000 per year or Ksh5,000 per month on the value of meals provided by an employer.

An amount not exceeding Ksh360.000 paid by an employer as a gratuity or similar payment in respect of employment or services rendered for each year of service paid into a registered retirement pension scheme shall also be excluded from gains and profit of employment.

"Gains and profit 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 Ksh60.000 per year (Ksh5.000 per month)," KRA added.