Filing your income tax return is a crucial part of financial responsibility, and it’s necessary to understand how to accomplish this task effectively. This guide will help demystify filing your income tax in Kenya. This task may seem complex but can be simplified when the proper steps are followed. It will provide you with a step-by-step process for 2025, equip you with the requirements, and guide you through the ins and outs of Kenya’s Income Tax Return Process.
We have divided the text into parts so that you can enjoy reading and follow the guide smoothly. This is the first part of a series of three posts on 2025 income tax returns in Kenya. Let’s start our journey!
Understanding Income Tax in Kenya
The Income Tax Act mandates a direct tax on Kenya’s individual, corporate, and certain entity incomes. Tax rates vary based on income and taxpayer status.
Taxable income encompasses earnings from employment, business, rent, dividends, royalties, and pensions. However, some forms, like insurance proceeds and gifts, aren’t taxed. Corporations pay tax on net profits.
The Kenya Revenue Authority (KRA) is in charge of administering the country’s tax system. For instance, they’re responsible for identifying taxpayers, setting tax rates, collecting taxes, and enforcing tax laws.
There are three types of income tax:
- Pay As You Earn (PAYE): This tax is charged on employment income and is deducted at source – your employer – withholds the tax and remits it to KRA on your behalf. The rates for PAYE are progressive, meaning the more you earn, the more tax you pay.
- Corporation Tax: This is charged on company profits, with resident companies taxed on their worldwide income and non-resident companies taxed on income accrued or derived in Kenya. The standard corporation tax rate currently stands at 30% for resident companies and 37.5% for non-resident companies.
- Individual Tax or Residential Tax: This applies to the income of persons resident in Kenya outside of employment. This tax is charged progressively, ranging from 10% to 30%.
Your responsibility as a taxpayer is to understand how income tax works and comply with the requirements. The next sections will explain how to effectively meet your obligations by filing your income tax return.
Key Dates and Deadlines for Filing Your Income Tax Return
Meeting the tax deadlines are crucial in any tax filing process. In Kenya, the financial year runs from 1st July to 30th June the following year, and various important dates and deadlines are applicable depending on your type of taxpayer. Knowing these deadlines can save you from penalties and interest charges for late filing.
Individual Income Tax (PAYE)
- Monthly Returns: These should be filed by the 9th of every month for income earned in the preceding month.
- Annual Returns: The deadline is 30th June each year for income earned in the previous financial year.
Business Income Tax
- Monthly Returns: PAYE deducted from employees’ earnings should be filed by the 9th of the following month.
- Quarterly Installment Payments: The first payment instalment must be made by 20th March, the second by 20th June, the third by 20th September and the final deposit by 20th December.
- Annual Returns: These are due on or before 30th June in the sixth month following the end of each income year.
Please note that if any of these critical tax dates fall on a weekend or public holiday, the tax should be paid on the preceding business day.
This schedule might appear overwhelming, but it’s quite convenient once you get the hang of it. Just mark these dates on your calendar and plan your tax activities accordingly to avoid unfortunate surprises.
Last, it’s better to start preparing your tax return well before the deadline. The earlier you start, the less stressful and more efficient the process will be!
Gathering the Necessary Documents and Information
Preparing to file your income tax return begins with the necessary documents and information. These records are the foundation of your tax return and serve as substantiation for income declared and deductions claimed.
Income Documents
- Payslips: You need all your payslips for the tax year. This records your cumulative earnings and any tax deducted at source.
- Bank Statements: This accounts for any additional income earned that may be subject to tax—for instance, interest earned on savings.
Deductions Documents
- Insurance Premium Receipts: If you pay life or health insurance premiums, these can be deducted. Ensure you have the receipts from the insurance company.
- Mortgage Interest Statement: The interest paid is deductible if you have a home loan. Your financial institution should provide a statement detailing this.
Other Documents
- Investment Details: Investment income or loss may affect your tax liability. Obtain statements from your investment broker that summarise the year’s activities.
- Donation Receipts: Contributions made to qualified organisations may be tax deductible. Keep the receipts as proof of your donation.
Amassing these documents and information may take some time, so start well before the tax filing deadline. Having a system to keep track of these documents all year round can make the process smoother. Moreover, these documents can also provide an easy reference in future disputes or audits by the Kenya Revenue Authority (KRA).
Being honest and having the best policy when filing your income tax return is always good. The Kenya Revenue Authority has several ways to cross-check the income figures you declare on your recovery against the records they receive from your employer or other authorised sources. Any discrepancies could lead to fines, penalties, or legal actions.
Choosing the Right Filing Method
Filing an income tax return in Kenya involves selecting the right method for your unique circumstances. The Kenya Revenue Authority(KRA) understands that everyone’s situation is different, so they offer various filing options, which we’ll address below.
Electronic Filing (eFiling) Method
Most Kenyans choose the electronic filing (eFiling) method through the iTax system, which is generally the fastest, most secure, and most convenient. This is particularly beneficial for anyone who wants to file their income tax returns without visiting a KRA office physically. It allows you to file your returns from anywhere, as long as you have an internet connection.
Physical Filing Method
Despite its declining popularity due to the surge in online computing, physical filing is still an option. Still, it could be faster and more convenient due to the paperwork involved. Additionally, errors are more likely to occur when manually filling out the paperwork. If you prefer this method, you must visit a KRA office, pick the relevant income tax returns form, fill it out, and submit it back to the officials.
Choosing the Right Method
The right filing method often depends on your specific situation and preferences. If you’re tech-savvy and your tax matters are straightforward, eFiling could be the best choice. But, if your tax affairs are complex, consider hiring a tax agent to streamline the process. Finally, the physical filing method could be ideal if you need more time to handle your tax matters online.
However, it can be more complex and time-consuming.
With your chosen method in mind, preparing early and acquaint yourself with the process is essential to avoid unnecessary last-minute rushes and errors. Always contact KRA or tax professionals for clarification on anything you need help understanding.
Registering for and Accessing the iTax System
Filing your income tax return digitally has become the norm in Kenya, simplifying and streamlining the process considerably. The online method of filing income tax returns is accomplished via the iTax system. But before you can start using it, you must first register.
Here’s how to go about it.
Registration on the iTax System
- Access the Kenya Revenue Authority (KRA) website and go to the iTax option. A dropdown menu will appear. From the list, select “e-Registration.”
- This will direct you to the next page, where you must choose “Taxpayer Type”. If you are filing as an individual, then pick “Individual.“
- Then, you’ll be required to supply requisite information such as your National ID Number, Date of Birth, First Name, Surname, and others.
- Next, ensure your contact information, such as the email address and phone number, are correctly filled in. This is where your iTax password will be sent once your application is processed.
- Finally, click on the “Submit” button. You will receive an acknowledgement receipt for your application. Your login password will be sent to the provided email within 48 hours.
Accessing the iTax system
After successful registration, you can access the iTax system by following the steps outlined below:
- Visit the KRA website again and select the iTax Portal under the eService drop-down menu.
- Enter your Personal Identification Number (PIN) in the iTax PIN checker.
- Upon validation of your PIN, you will be prompted to enter your password (delivered to your provided email) and key in the security stamp as shown.
- If the login is successful, you’ll be directed to your personalised iTax dashboard. You can file your returns from here by clicking “Returns” from the menu and selecting “File Returns.”
Please note if you forget your password, use the “Forgot Password/Unlock Account” option on the login screen of the iTax system.
With this guide, registering for and accessing the iTax system should be straightforward. Precision is key when entering your information during registration to ensure smooth transactions when accessing your account.
Continue in the next post here.
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