Take Home More In Your Salary This December After KRA Changes
The taxman revealed that the new changes would take effect on December 27, 2024.
Viral Tea Ke Writer 
Kenyans at the end of this month...and this year, are set to take home more than they recently did in terms of their monthly salaries after the Kenya Revenue Authority (KRA) announced sweeping changes to the computation of Pay-As-You-Earn (PAYE) tax.
This is in line with the Tax Laws (Amendment) Bill, which was signed into law by President William Ruto alongside seven different bills.
In a notice dated Thursday, December 12, the taxman revealed that the new changes would take effect on December 27, 2024.
"Kenya Revenue Authority (KRA) informs employers and the public that pursuant to the Tax Laws (Amendment) Act, 2024 which comes into force on 27th December 2024, the following changes shall be applicable in the computation of PAYE for December 2024 and subsequent periods," the taxman stated in part.
Kenya Revenue Authority (KRA) offices at Times Tower, Nairobi. /FILE
In line with 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. This is to ensure that employed Kenyans get a bump in their take-home salaries 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)."
KRA meanwhile informed employers that the following tax reliefs shall cease to apply:
- Affordable Housing Relief
- Post-Retirement Medical Fund Relief
Furthermore, 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.
With these changes, employed Kenyans will get a huge sigh of relief having battled heavy taxation that has seen them earn less, possibly dimming the appeal of having a well-paying job.
However, these changes may not take flight until December 27, 2024, per the new provisions of the Tax Law, which has left financial professionals with a dilemma; whether the new provisions would apply to the whole of December 2024 or from the effective date when PAYE (Pay As You Earn) payroll taxes.
The calculation of PAYE with the new policy has left them at a crossroads on whether the law would apply to December or the last days of the month and whether to process the payroll before December 27 or later. To understand this dilemma, most companies are on the verge of closing for the festive season, some for the rest of the year.
Kenyans thus have two choices; wait until your accountant calculates the payroll before December 27 or after. With the former, you get your salary earlier but take home less, but the latter will see you take home more, but be forced to wait before then, potentially disrupting your budget for the Christmas festivities.
The former will also have to force you to budget wisely for January given that the next payday will be at the end of January 2025. However, starting in January, you'll be accustomed to taking home more in your monthly paycheck as the housing levy will be deducted from payable tax liabilities.
Employees are encouraged to review their tax obligations to understand how the changes will impact their net income. KRA has urged all employers and taxpayers to familiarise themselves with the amendments and reach out for clarification where needed.
