KRA Breaks Down Your December Salary After New Tax Law Adopted

After President William Ruto assented to the Tax Laws (Amendment) Act, 2024, into law on December 13 which comes into effect on December 27, the Kenya Revenue Authority (KRA) has outlined the major changes that Kenyans will be witnessing in their salaries beginning end of this month.

In an official notice dated Thursday, December 19, the taxman also clarified the confusion that had been witnessed in calculating December salaries.

KRA has directed that the provisions of the law are applicable for the entire month of December. In other words, no prorated application is expected. This clarifies the confusion finance individuals were facing on whether to include the provisions in December salaries, especially with the early payroll run due to the Christmas holiday.

This means that the Affordable Housing Levy and Social Health Insurance Fund as allowable deductions apply to December 2024.

“Kenya Revenue Authority (KRA) informs employers and the public that pursuant to the Tax Laws (Amendment) Act, 2024 which comes into force on 27 December 2024  the following changes shall be applicable in the computation of PAYE for December 2024 and subsequent periods,” the notice read in part.

From December, Kenyan pay slips are expected to look different.  

According to KRA, amounts deductible in determining the taxable employment income shall include amounts deducted as an Affordable Housing Levy, contribution to a post-retirement medical fund subject to a limit of Ksh15,000 per month, and contributions made to the Social Health Insurance Fund (SHIF).

It shall also include Mortgage interest, not exceeding Ksh360,000 per year that is Ksh30,000 per month, and contribution made to a registered pension or provident fund or a registered individual retirement fund up to a limit of Ksh360,000 per year that is Ksh30,000 per month.

Non-taxable gains and benefits from employment will not be subjected to income tax. 

This includes the value of a benefit, advantage, or facility granted in respect of employment, where the aggregate value is less than Ksh60,000 per year or Ksh5,000 per month.

Meals provided by an employer on the value of Ksh60,000 per year or Ksh5,000 per month will also not be subjected to income tax.

Gratitude payments offered by the employer amounting to Ksh360,000 per year will also not be subjected to income tax. In most cases, gratitude payment is the payment made to the retirement pension scheme.

As Kenyans gear into 2025, these changes might lighten the financial load for many households, as it promises more money for them.