Section I | Part I

Taxation of Income
of Individuals
 Section I | Part I

Presentation Outline

Taxable persons and Non-taxable persons.

Taxable income and Non-taxable income

Allowable and Non-Allowable expenses

The year of income and the accounting year

Meaning of residence and its significance

Meaning and Sources of income

Taxable benefits and non-taxable benefits,

computing the income tax liability of individual

Tax reliefs/tax credits

Administration of PAYE and offences, fines, penalties and interest

 Section I | Part I
Income Tax of Individual
• Individual Income Tax is a direct tax charged for each year of income on all the
income of a person, whether resident or non-resident, which accrued in or was
derived from Kenya.
• One way of collecting Income tax of individual is Pay As You Earn (PAYE).
• PAYE is a method of collecting tax from individuals, both Resident and Non-
resident, in gainful employment.
• If you are an employer you are required to register for this obligation.
• As an employer you are required to deduct PAYE from your employees' salaries
and wages at the prevailing rates and remit the same to KRA on or before the 9 th
of the following month.
 Section I | Part I

Definition of key terms under Income tax

• Taxable person-An individual (natural person) or A legal person (artificial
person) subject to income tax as provided in the Income Tax Act (persons
assessable).e.g a company;Trust, Co-operative Society, Estate, Club, Trade
Association etc.
• A taxable person does not include a partnership. A partnership is not taxed on its
income, but the partners are taxed on their share of profit or loss from the
partnership. However, under Turnover Tax ((TOT), a taxable person has been
defined to include a partnership
• Non-taxable persons-persons or institutions not subject to income tax as
provided in the Income Tax Act in Kenya (persons not assessable)
• Taxable income - This is income of a person that is subject to tax under the
Income Tax Act. It includes, employment income, business income among others.
• Non-taxable income-This is income of a person that is left in the list of the
taxable income under the Income Tax Act.
 Section I | Part I

Definition of key terms under income tax

• Allowable expenses-expense allowable or deductible against taxable
income as provided in the Income Tax Act.
• Non-Allowable expenses-expense not allowable or non deductible
against taxable income as provided in the Income Tax Act.
• Taxable benefits-a benefit which increases taxes
• Non-taxable benefits- a benefit which are not taxed or partially
taxed.
• Residence - The term residence is a concept used to determine the tax
treatment of a person. It applies both to individuals and companies.
• A resident is a concept used for tax purposes and has nothing to do
with the nationality, citizenship or domicile of the tax payer.
 Section I | Part I

Concept of Resident in relation to Individual

i) Has a permanent home in Kenya and was present in Kenya for
any period during the year of income under consideration; or
ii) Has no permanent home in Kenya but was present in Kenya
for a period or periods amounting in total to 183 days or more
during the year of income under consideration; or
b) Has no permanent home in Kenya but was present in Kenya
for any period during the year of income under consideration
and in the two preceding years of income for periods
averaging more than 122 days for the three years of income.
 Section I | Part I

Example
Daysand
Moris and Mercy visited Kenya between 2014 in Kenya
2016 as follows;
Year Moris Mercy
2014 365 364
2015 1 1
2016 3 1
Total days 369 366
Average for the three years 123 days 122 days

• Moris was a resident in 2016 as the average days for the three years is
more than 122 days. Mercy was not a resident in 2016 as the average
days for the three years at 122 is not more than 122 days.
• Kenya includes the air space which is a distance up in the sky considered
to be part of Kenya. It also includes the Territorial waters which is a
distance into the sea considered to be part of Kenya.
Section I | Part I

Example
•  Mrs.Gordon, a Kenyan citizen, is married to a
citizen of Canada. She was employed in Kenya
until 31 August 2020 when she resigned to join her
husband in Canada. Comment on whether the Mrs
Gordon is a residents of Kenya for tax purposes for
the year ended 31 December 2019. Justify your
comment in each case.
 Section I | Part I

Concept of Resident in relation to Body corporate

i) The body is a company incorporated under the
corporate laws of Kenya; or
ii) The management and control of the affairs of the
body was exercised in Kenya in the year of income under
consideration; or
iii) The body has been declared, by the CS for The
National treasury through a notice in the Gazette, to be
resident in Kenya for any year of income.
 Section I | Part I
The significance of the concept of residence
• Kenya resident individuals pay Kenya income taxes on their incomes from Kenya and
world wide employment, but Kenya non residents pay Kenya income taxes only on
their income from Kenya.
• Residents individual pay income taxes at graduated scale rates but non residents
individuals pay income taxes at special rates on certain specified incomes or sources.
• Resident individuals can claim personal relief is granted as a deduction against tax
liability. Non-residents individuals cannot claim personal relief as a deduction from tax
liability.
• Resident individual pension Income - The first Sh.600,000 received in lump sum is tax
exempt. In case of Periodic payment, the first Sh.300, 000 p.a. is tax exempt while
non-resident individual the gross pension income received for services rendered in
Kenya is subject to withholding tax of 5% As the final tax.
• Resident companies are taxed at the rate of 30% on their taxable income while non
residents companies with a branch in Kenya are taxed at a higher rate of 37.5%.
• Withholding taxes are deducted at source on all income of Kenyan non residents but
residents have withholding tax deducted on only some of their incomes.
 Section I | Part I

Year of income and accounting year

• Year of income means a period of 12 months commencing 1st

January and ending on 31st December each year. Tax is
charged for each year of income. the year for which financial
statements are prepared to determine the taxability of person

• Accounting year refers to the period for which accounts are

prepared i.e. the year for which financial statements are
prepared to determine the profitability of person. It is
normally a 12 month period which could commence any time
and could end in the following calendar year.
Section I | Part I

General criteria of taxing income or charging income tax

Service for
which the
The income
income is paid
must accrue in
for must be
Kenya.
rendered in
Kenya.

Payment for the The person or

service must body corporate
have originated must be a
from Kenya. resident.
Section I | Part I

The meaning of income

Gains from
employment/employment
income

Gains or profits from

Professional income business/ farming

Pension and provident

Rent income
funds

Dividends and interest

income
Section I | Part I

EMPLOYMENT INCOME
• Employment Income arises as a result of gains or profits
from employment or rendering services
• Employment has been defined as a contractual
relationship between the master (employer) and a
servant (employee) where the employee renders services
and the employer rewards or remunerates the employee.
• Such rewards are also referred to as gains or profits from
employment or rendering services and may be in two
forms:
• Cash rewards or benefits
• Non cash rewards or benefits
 Section I | Part I Employment Cash Benefits
i. Payments such as salaries, wages, payment in lieu of leave, overtime pay,
commission, bonus, directors fees, golden handshake
ii. Employee’s private expenses paid by the employer e.g. Telephone bills, electricity
bills, water bills, insurance premiums, school fees, mortgage payment (provided
they are not taxed by the employer).
iii. Allowances-These include house, travelling, medical leave, mileage, sitting,
acting, entertainment e.t.c
iv. Gifts and rewards- Where a gift is received by virtue of employment or services
rendered, it is regarded as a gain from employment hence taxable e.g. tips to a
waiter, Christmas gifts to employee and long service awards
v. An amount received as compensation for the termination of a contract of
employment or service
• Meals provided by the employer to employee not exceeding Ksh 48,000 p.a are not
taxed.
• Cash benefits are taxable except allowance of 2000 per day and accounted of town
cash allowance.e.g subsistence, night out of Ksh 2,000 per day not taxed
Section I | Part I
Employment Non-cash Benefits
These are advantages, facilities, benefits, arising from employment

i. Benefits in kind.
ii. Provision of services.
iii. Servants
iv. Motor car
v. Housing benefit
vi. Passages
vii. Medical Benefit
viii. School fees
ix. Share purchase under Employee share option plans (ESOPS)
x. Amount received for termination of employment.
xi. Lump sum payments
xii. Low interest benefit and fringe benefit
Section I | Part I
Benefits in kind

• These are benefits other than that Specifically Brought to

Tax by the Act. ) The benefit, advantage, or facility arising
from employment. These are taxed if they aggregate
(total) in value is more than 36,000 p.a or sh. 3,000 p.m
w.e.f 1st Jan 2006. e.g. airtime (non cash benefit).
• The value is the higher of: -
• The cost to employer or
• Fair market value of the benefit,
• These Benefits may include goods/services, travelling
tickets, Christmas vouchers, food stuffs, Transport to and
from work, security, etc.
Section I | Part I
Provision of services
These are services provided by an employer to an
employee where the costs of providing such services are
met by the employer on behalf of the employee. The
taxable amount will normally be:
• The higher of the actual cost incurred or the prescribed rate
• In case there is no prescribed rate provided, use the higher of
market cost or the actual cost incurred
NB
• Provision of furniture- 1% per month on cost or 12 %
per annum.
• Telephone: Use 30% of Bills
 Section I | Part I

Commissioner`s Prescribed benefits

Section I | Part I

Example
• Mwakale house was furnished by the employer at a
cost of Sh 200,000. His private telephone charges
averaging Sh1,800 per month are also paid by the
employer. Compute taxable amount for mwakale.
• Furniture= (0.12x200,000)   24,000
• Telephone (30%X1800X12)   6,480
Section I | Part I

Servants

• Where provided by the employer e.g. house servant

cooks, gardener, watch man
• The taxable amount will normally be:
• The higher of the actual cost incurred or the prescribed
rate
• In case there is no prescribed rate provided, use the
higher of market cost or the actual cost incurred.
 Section I | Part I

Motorcar
• A motor car benefit arises where an employer provides a
company car to an employee to be used either entirely for
private purposes or partly for use partly by the business
of the employer or privately by the employee.
• The value of the benefit taxable on the employee is the
higher of:
2% per month on the initial cost incurred by the employer. Or
The Prescribed value depending on the CC rating of the
vehicle.
 Section I | Part I

Motor Car Benefit-Prescribed Rates

 Section I | Part I

Example
• Mwakale who is employed as a Financial Controller is
provided with a car - Mitsubishi Pajero (cc rating 2400)
which was bought in July 2016 for Kshs. 2,500,000.
• Car benefit is calculated as follows:
• - 2% x Kshs. 2,500,000 = Kshs. 50,000 per month
• - Commissioner’s fixed monthly rate cc. rating 2,400 = Kshs.
8,600
• The chargeable car benefit is therefore Kshs. 50,000 per
month.
Section I | Part I

Motorcar
• NB
• Where an employee has been provided with a hired or leased vehicle,
the taxable value of the car benefit is the lease or hire charges.
• However, the Commissioner may determine a lower rate for the
benefit where the employee can demonstrate and provide proof of
restricted usage of the company car.
• Restricted use Vehicles: The Commissioner may determine the lower
rate of the benefit depending on the usage of the vehicle
• Company transport services: Where a company provides transport
services for its employees or directors from home to office and back as
pooled transport service, the cost of providing the transport is not a
taxable benefit. It may be treated as a non-cash benefit.. S.5 (2B) (a)
(ii)
 Section I | Part I

Motor Car Benefit-Vehicle mileage claims

Where employees or directors use their personal vehicles to and claim

mileage subject to prove of the same. The mileage claims are allowed
and paid for under the following conditions:
• 1. When employees use own vehicles on official duty.
• 2. Vehicle logs are used to record mileage for purposes of
reimbursement of mileage.
• 3. Receipts and invoices for supplies towards the travel are maintained
and lodged with the company. the expenses must have been incurred
in the name of the company.
The Revenue Authority allows use of the Automobile Association (AA)
mileage rates for mileage reimbursement, which are not taxable
benefits.
Section I | Part I

Housing Benefit
• It is a taxable benefit from employment where an
employer provides housing to an employee and the
value of the benefit will be computed depending on the
type of employee:
• Agricultural employee
An agricultural employee is one who is required by the
terms of his employment to reside on a farm or
plantation. Housing benefit will be 10% of gains or
profits from employment excluding the value of the
premises minus the amount of rent charged to the
employee by the employer.
Section I | Part I

…housing continued
• Whole time service Directors
This is a Director of a company who is required to devote substantially the whole
of his time to the service of that company in a managerial or technical capacity and
is neither the beneficial owner nor able to control directly or indirectly more
than 5% of the share capital or voting power of the company.
• Housing benefit will be the higher of:
• 15% of the gains or profit from employment excluding the value of the premises minus
the amount of rent charged to the Director or:
• Actual rent paid by the employer under an agreement made at arms length with a third
party
• Directors other than Whole time
Housing benefit will be the higher of:
• 15% of the total income excluding the value of the premises minus the amount of rent
charged to the Director or:
• Actual rent paid by the employer under an agreement was made at arms length with a third
party
Section I | Part I

…housing continued
• Ordinary employee/ Any other employee
Housing benefit will be the higher of:
• 15% of gains or profits from employment excluding the
value of the premises.
• Actual rent paid by the employer under an agreement
made at arms length with a third party
Section I | Part I

Example
• Mwakale a whole-time service director earns basic
salary of Kshs.56,000 per month plus other benefits
– (e.g. Motor Car, House Servants etc.) – Ksh.9,900
is housed at Runda Estate – Nairobi.
• Employer pays the Landlord Shs.35,000 per month
(i.e. Shs.420,000 per annum) under an agreement
made at arm’s length.
• Required: Calculate the housing benefit and the
taxable income
 Section I | Part I
Solution;
Calculation for Quarters
• Basic Salary - Kshs.56,000
Add:
Benefits - Ksh.9, 900
Total - Kshs.65,900
 
65900  15
100
15% of value of Quarters = Ksh.9, 885 Vs Ksh.35,000(The higher of)

• Rent paid by the employer Kshs.35,000 p.m is the amount to be brought to charge and
not 15% of value of Quarters (Housing Benefit)
• Total taxable income =65,900+35,000=100,900 p.m (Taxable Income)
Section I | Part I

Passages
• It arises where the employer pays for or reimburses
the employee’s travel expenses from his workplace
to his rural home.
• The value of the passages is a non-taxable benefit
of the employee provided:
 Section I | Part I

Passages

• 1. The employee or director is not recruited from Kenya and is

not a Kenyan.
• 2. The employee or director is in Kenya to work exclusively for
the employer.
• 3. Payments to the employee or director are not made
periodically within the year – it is a one-off payment.
• 4. Payment to the employee or director is not a one time-off
payment for more than one year.
• 5. The employee or director is not free to save or use the
payment for other purposes. They must account for the
payment by leaving the country.
Section I | Part I

Medical Benefit
• Where an employer provides ALL its employees (including
directors) with free medical services or free medical
insurance, the value of such medical service or insurance is
not a taxable benefit on the employee.
• Note
• a. In the case of medical services provided to a director other
than a whole time service director shall be the limit which
will be prescribed by the Cabinet Secretary (National
Treasury) from time to time. The current limit is
Kshs.1,000,000 per year.
• b. The medical insurance must be provided by a provider who
is approved by the Commissioner of Insurance.
Section I | Part I

School Fees

Where the employer pays school fees for the employee’s child,
dependent or relative, such payment becomes a taxable benefit
on the employee if not already taxed on the employer.
• Education fees of employee’s dependents or relatives will not
be taxed on the employees provided the same has been taxed
on the employers.
• Educational fees for dependents of low income employees
paid or foregone by an educational institutional employer are
not taxable on either the employer or the employee
• Education fees for employee (self) is not taxable provided it
relates to their work and will enable them perform their
duties better.
Section I | Part I

Employee Share option plan

• In the case of an employee share ownership plan, the value of the
benefit shall be the difference between the market value per
share and the offer price per share at the date the option is
granted by the employer.
 The granting of company shares to employee for better
performance is a benefit in Kind.
 The benefit is calculated as follows:-
a) Shares issues for free:
Taxable benefit = Market price per share (MPS) X No. of shares allotted
b) Shares issued at preferential price (PF):
Taxable benefit = (MPS– PF) X No. of shares allotted.
Section I | Part I

Fringe Benefit tax

• Loans acquired after 1st June, 1998 at low interest
rate are charged on the employer.
• The taxable benefit is equal to:
Amount of loan (market interest rate – loan interest
rate) x 30%.
• The taxable amount should be remitted with PAYE
by the 9th of the following month.
• The market interest rate is usually announced by the
commissioner of tax in the local dailies.
Section I | Part I

Fringe Benefit tax

• Assume an employee is given a loan of 1m shillings
to purchase a motor vehicle at an interest rate of 5%
p.a. repayable over a 10 year period. Given that the
market rate is 8%, what are the tax implications?
• The loan would be subject to a fringe benefit tax
which is payable by the employer at the corporate
tax rate.
Sh. 1,000,000 (8% -5%) x 30% = sh. 9,000
Section I | Part I

Low Interest Rate Benefit

• Employees will continue to be taxed on low interest rate benefit in

respect of loans provided by the employer on or before 11th June,
1998 as before.
• The low interest benefit chargeable on the employees is calculated as
the difference between interest charged to the employee and the
prescribed rate of interest of 15% per cent, or such interest rate
based on the Market Lending Rates prescribed by the Commissioner;
whichever is lower.
• Example; Loan provided by employer - KShs.1,500,000 Employer’s
Loan Interest Rate - NIL (interest free), Prescribed Rate of Interest - 2%
Calculation of Low Interest benefit:
• Low Interest Benefit is (2%-NIL = 2%): Kshs 1,500,000 x 2% =
Kshs.30,000 per annum i.e. Kshs.2,500 per month
Section I | Part I

Allowable deductions against taxable employment income

• Pension contributions
• Mortgage interest-Owner occupied
 Section I | Part I

Pension Contribution
• Contributions/Deductions to a registered pension scheme or provident funds are
deductible subject to prescribed limits. Benefits as a contributor
• The prescribed limits for the employee’s tax allowable amount or deductible contribution
is limited to the lower of:

i. Actual contributions
ii. 30% of taxable employment income; or
iii. Set limit of Kshs 240,000 p.a. or Ksh 20,000 p.m

• Annual pension income is tax free up to a maximum of Ksh. 300,000 p.a. or Ksh. 25,000
p.m.(Periodic withdrawal)
• Tax free amount on retirement is the first Ksh. 600,000 lump sum amount
• Benefits after employment (Lumpsum withdrawals)
• Note: Pension Contribution made by employer is not taxable
Section I | Part I

Example
• Mwakale contributed Sh 25,000 per month towards
a registered pension scheme.
Less:pension contribution  

Actual (25,000X12)   300000

30% 0f EI(30%0f 1803480) 541044

Set limit     240,000

Section I | Part I

Mortgage Interest Relief

• Where a resident individual takes a loan from an
approved financial institution for the purpose or
substantial renovating of a home, premises which he
reside, a relief called Mortgage relief or owner
occupied interest relief shall be granted against his
taxable income of the by up to a maximum of KShs
300,000 p.a
• Relief is given on interest from banks, insurance
companies, building societies and National Housing
Corporation only.
• Sacco's have been left out among the qualifying
financial institutions.
Section I | Part I

Conditions for Mortgage Relief

• Money is borrowed from specified financial

institutions.
• The loan is used for purchase of premises or
improvement on premises.
• The loanee occupies the premises for residential
purposes.
• No person may claim a deduction in respect of more
than one residence.
• A married woman has the option to claim the
deduction if the property is registered in her name.
 Section I | Part I
Compensation for termination of
Employment
• An amount received as compensation for the termination
of a contract of employment or service, whether or not
provision is made in the contract for the payment of that
compensation is taxable.
• Where the contract is for a specified term;
• Where the contract is for an unspecified term and provides for
compensation;
• Where the contract is for an unspecified term and does not provide for
compensation;
 Section I | Part I

Methods of Spreading Compensation

A) Specified term
• Where there is a specified term, the amount of the compensation will
be spread evenly over the unexpired period at equal amounts and
taxed accordingly.
Illustration
• Mr. Ole Wako’s employment contract for 5 years is terminated on 31st
Dec 2016 after it had run 3 years. Compensation of Sh. 1.5 Million is
paid to the employee and the employee’s rate of earning as at the
date of termination was Sh. 500,000 p.a.
Required
• Establish the amount of the compensation that will be assessed to tax
showing clearly the years to which it relates.
 Section I | Part I

Solution;
Mr Ole Wako
Determination of the assessable amount of compensation
  Ksh
Amount of compensation 1,500,000
Contract period 5 years
Unexpired period 2 years
   
Compensation is spread as follows:  
Year 2017 750,000
Year 2018 750,000
Assessable or taxable Amount 1,500,000
Section I | Part I

…continued
b) Unspecified term with a provision for terminal payment
• Where the contract is for unspecified term and provides for terminal payment,
then the compensation will be spread forward and assessed at the rate of the
employee’s remuneration per annum immediately before termination.
Illustration
• Mr. Ole Wetu had a contract for an unspecified term providing for payment
of Sh 700,000 as compensation in the event of termination. It is
terminated on 31st Dec 2016 and the employee’s rate of earnings was Sh
300,000 p.a.
Required
• Establish the amount of the compensation that will be assessed to tax
showing clearly the years to which it relates (the spread). Contract is for
unspecified term and provides for compensation
 Section I | Part I

Solution;
Mr Ole Wetu
Determination of the assessable amount of compensation
  Ksh
Rate of earning p.a 300,000
Compensation 700,000
   
Compensation is spread as follows:  
Year 2017 300,000
Year 2018 300,000
Year 2019 100,000
Assessable or taxable Amount 700,000
Section I | Part I

…continued
c) Unspecified term and no provision for terminal payment
• Where the contract is for unspecified term and does not provide for
terminal payment, the compensation is to be spread forward in equal
amounts for three years.
Illustration
• Mr. Ole Wao had a contract for unspecified term that had no
provision for payment of compensation upon termination of
employment. The contract is terminated on 31st Dec 2016 and Sh 1.5
million is compensation.
Required
• Establish the amount of the compensation that will be assessed to
tax showing clearly the years to which it relates (the spread).
Contract is for unspecified term and provides for compensation
 Section I | Part I

Solution;
Mr Ole Wao
Determination of the assessable amount of compensation
  Ksh
Compensation 1,500,000
   
Compensation is spread as follows:  
Year 2017 500,000
Year 2018 500,000
Year 2019 500,000
Assessable or taxable Amount 1,500,000
 Section I | Part I

Lump sum payments eg gratuities, service payments and bonuses

• Employment income is assessable on accrual basis; that is, over the

period it has been earned and become due for payment. The time
the income is received is, therefore, immaterial.

• Where an amount is received in respect of employment or a service

rendered in a year of income different from the year of accrual, such
income is deemed to be income of the year of accrual.
• However, there is a provision which states that where the year of
accrual is earlier than four (4) years prior to the year of receipt, the
income is to be treated as that of year of income which expired 5
years prior to the year in which the income is received or prior to the
year of income in which employment ceased
Section I | Part I

Cont~
• The service gratuity amount is to be spread backwards and
taxed together with income earned in the relevant years.
• Notice pay is assessable in the period immediately after
date of leaving employment.
• Pay in lieu of leave should be taxed in the year to which the
leave days relate.
Section I | Part I

Example
Mr. Kiboko Yao left employment in 2017 after 30 years of
service and was paid service gratuity of KShs. 660,000. He was
also paid KShs 25,000 relating to 2013 accrued leave days.

The amounts due will be taxed as follows:

• 2016 22,000
• 2015 22,000
• 2014 22,000
• 2013 22,000 + 25,000
• 2012 22,000 + 550,000
Section I | Part I

Wife’s income
Wife’s employment income
• The wife's employment income is considered to be
at arm’s length if she is not an employee of:
i. Her husband
ii. A partnership in which the husband is also a
partner
iii. A company in which the control jointly or
separately, more than 12.5% of the share capital.
iv. A trust or settlement created by her husband.
Section I | Part I

Wife’s income
• If she is not an employee of any of the above, she
would be taxed separately on her employment
income.
• If employed by any of the above, her income will be
deemed to be that of her husband.
Section I | Part I

Wife’s income
Wife’s professional income
• With effect from first June 1989, the wife’s
professional income is categorised separately and
assessed on the wife together with her employment
income if it is not at arm’s length.
• The professions recognised for the purpose include
accountancy, law, engineering, surveying, medicine,
architecture and dentistry.
Section I | Part I

Wife’s income
• The wife’s professional income would cease to be
assessed separately on her if:
(a) she is in partnership with her husband
(b) she is a partner where her the husband is a
partner.
• In such cases, her income will be deemed to be the
husband’s.
 Section I | Part I

Personal Reliefs/Tax Credits

• This is an amount that is deductible from the tax payable by a taxpayer
in any year of income. There are basically two categories of personal
relief’s namelyTax at source , e.g. PAYE (Pay-As-You –Earn).

• Monthly Personal Relief

A resident individual with taxable income is entitled to a personal
relief of Kshs. 2400 per month (i.e. Kshs. 28,800 per annum).
This is a uniform relief and employers are advised to automatically
grant personal relief to all employees irrespective of their marital
status.
Individuals serving several employers qualify for personal relief from
only one employer (i.e., main employment).
Section I | Part I

Insurance Relief
• A resident individual shall be entitled to insurance relief at the
rate of 15% of premiums paid subject to maximum relief
amount of Kshs. 5,000 per month (or Kshs. 60,000 per annum)
if he proves that;-
- he has paid premium for an insurance made by him on his life, or the life of his
wife or of his child and that the Insurance secures a capital sum, payable in
Kenya and in the lawful currency of Kenya; or
- his employer paid premium for that insurance on the life and for the benefit of
the employee which has been charged to tax on that employee; or
- both employee and employer have paid premiums for the insurance:

NB
• Premiums paid for an educational policy with a monthly period of at least 10
years shall qualify for this relief.
Section I | Part I

Exemptions
Note:
 Persons with disabilities have been
exempted from tax on their taxable income
of up to KShs. 1.8 million p.a (KShs.
150,000p.m).
 The employee should provide a valid
exemption certificate.