Filing personal income tax returns is a mandatory requirement for all income-earning individuals in Kenya. Compliance with this obligation not only ensures adherence to the law but also promotes a culture of accountability. This comprehensive guide provides a step-by-step approach to filing tax returns, enriched with practical examples and information on related services to assist taxpayers.
Understanding Personal Income Tax in Kenya
The Kenya Revenue Authority (KRA) administers personal income tax under the Income Tax Act (Cap 470). Every individual with taxable income is required to file a return annually, irrespective of their employment status or source of income. Taxable income includes:
1. Employment income
2. Business income
3. Rental income
4. Investment income (e.g., dividends and interest)
5. Capital gains
Who Must File?
1. Residents earning income within Kenya.
2. Non-residents earning income within Kenya (subject to withholding tax).
3. Individuals with no income (required to file a NIL return).
Step-by-Step Guide to Filing Personal Income Tax Returns
1. Register on the iTax Portal
To file your returns, you need an active Personal Identification Number (PIN) and access to the iTax portal. Registration involves:
Ø Visiting the iTax Portal.
Ø Creating an account by providing your ID number, PIN, and email address.
Ø Activating the account via the email link sent by KRA.
2. Gather Required Documents
The necessary documentation varies depending on the source of income. Common documents include:
Ø P9 Form: Issued by your employer, summarizing annual income, tax deductions, and reliefs.
Ø Bank statements: For self-employed individuals to verify income.
Ø Rent receipts or lease agreements: For rental income.
Ø Dividend and interest certificates: For investment income.
Ø Records of expenses: Including insurance premiums, mortgage interest, and medical expenses (for applicable reliefs).
3. Log in to the iTax Portal
Access your account and navigate to the "Returns" menu. Select "File Returns" and choose the appropriate return type. Common categories include:
Ø Income Tax Resident Individual: For employed individuals.
Ø Income Tax Non-Resident Individual: For expatriates.
Ø Income Tax Turnover: For small businesses under the turnover tax regime.
4. Filing Employment Income Returns
Practical Example:
John, an employed resident, earns a monthly salary of KES 100,000. His P9 form shows:
Total earnings: KES 1,200,000.
PAYE deducted: KES 200,000.
Personal relief: KES 28,800.
Using the iTax portal:
1. Select "Income Tax Resident Individual".
2. Enter details from the P9 form.
3. Calculate tax liability and deduct PAYE.
4. Submit the return and download the acknowledgment receipt.
5. Filing Business Income Returns
Practical Example:
Mary, a boutique owner, earns KES 1,500,000 annually. Her deductible expenses (e.g., rent, utilities, and wages) amount to KES 500,000. Her taxable income is KES 1,000,000.
Steps:
1. Log in and select "Income Tax Resident Individual".
2. Declare gross income and itemize expenses.
3. Attach supporting documents such as invoices and receipts.
4. Submit the return.
6. Filing Rental Income Returns
Rental income is taxed at 10% for amounts below KES 15 million annually. For higher amounts, normal income tax rates apply.
Practical Example:
Joseph earns KES 30,000 monthly from a rental property, totaling KES 360,000 annually. Tax payable = 10% × KES 360,000 = KES 36,000.
Steps:
1. Select "Income Tax Rental Income".
2. Declare total rent and compute tax payable.
3. Attach tenancy agreements or rent receipts.
4. Submit the return.
1.
7. Filing NIL Returns
If you have no taxable income, you still need to file a NIL return.
Practical Example:
Grace, a recent graduate, is yet to secure employment. She logs into iTax and:
1. Selects "Income Tax Resident Individual".
2. Confirms the NIL return option.
3. Submits the return.
Important Deadlines
Annual filing deadline: 30th June of the following year.
Penalty for late filing: KES 2,000 or 5% of tax due, whichever is higher.
Reliefs and Deductions
1. Personal Relief
Standard relief: KES 2,400 per month or KES 28,800 annually.
2. Insurance Relief
15% of premiums paid (up to KES 60,000 annually).
3. Mortgage Interest Deduction
Up to KES 300,000 annually.
4. Disability Relief
100% tax exemption for individuals with disability (requires certification).
5. Pension Contributions
Deductible up to KES 20,000 per month.
Supporting Services for Taxpayers
Tax Consultants: Assist in preparing and filing complex returns.
Example: An accountant helps a freelance writer consolidate multiple income streams.
iTax Support Centers: Offer free guidance on using the iTax system.
Example: KRA Huduma Centers provide personalized assistance.
E-Citizen Platform Integration: Enables seamless access to related government services.
Mobile Money Payment Options: Simplify payment of outstanding tax liabilities.
Conclusion
Filing personal income tax returns in Kenya is a straightforward process when approached systematically. By leveraging tools like the iTax portal and seeking professional assistance from reliable tax consultants like David and Associates - where necessary, taxpayers can ensure compliance and avoid penalties. This guide serves as a practical resource to demystify tax obligations and empower individuals to manage their tax affairs confidently.
About the Author
Dr. David Onguka brings more than 26 years of expertise in finance, tax, audit, and management to his role as Managing Partner at David & Associates - Certified Public Accountants. His extensive experience includes serving as General Manager and Group Chief Financial Officer at Ainushamsi Energy Limited for 6 years, as well as holding similar positions at Jaguar Petroleum Limited for five years. He began his career as an Audit Senior at PKF Kenya and was Finance Manager at Gapco Kenya Limited for seven years. He holds PhD in Finance from University of Nairobi (UON), MBA in Finance, CPA(K) and CPS(K). He is also a researcher, author, publisher and practicing member of ICPAK and Institute of Certified Secretary (ICS).
For inquiries, you can reach him at or link to our website: www.davidandassociates.co.ke
