Tax reliefs in Kenya (Personal and Insurance reliefs)

BLOG 28/02/2020

We often ask ourselves, apart from the services and public utilities we enjoy as a result of paying taxes, what other benefits does the government offer to the taxpayers? Does the government give room for reduction of a tax burden?   

The answer to this question lies partly in the Income Tax Act (cap 470), Section 30 which allows for personal relief at the rate determined under the third schedule. It is also found in Section 31 of the Income Tax Act, which allows for insurance relief on premiums paid for education policies, health policies or life insurance for resident individuals respectively. Personal and insurance reliefs form part of tax reliefs in Kenya. These incentives reduce the amount of tax one has to pay and are granted on a monthly basis.

Personal relief is the amount deducted by a resident person from tax payable by him. It acts as a credit against a tax liability. At present, every resident individual is entitled to a personal relief of Ksh.16,896 per annum (Kshs.1,408 per month) effective 1st January 2018. For example, if you computed your taxes for a particular month and the tax due amounts to Ksh.5000, you will enjoy a tax relief  of Ksh.1408. After deducting the tax relief, you will end up with a less tax burden of Ksh.3592.

One can also inquire how this applies to married persons. In Kenya, employers automatically grant personal relief to all employees irrespective of their marital status. Filing of a tax return for a married couple can be done jointly although their incomes are not lumped.

When an employee has more than one employer, he is entitled to a relief from only one employer (Income Tax Act, section 30).

Insurance relief is offered by a government to all life insurance policyholders. Resident individuals are entitled to relief on premiums paid for life, education and health policies. Every resident individual is entitled to an insurance relief of 15% of the amount of premiums paid for self, spouse or child, subject to a maximum of Kshs. 60,000 per annum.  The education policy must have a maturity period of at least 10 years.

 

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