The Kenya Revenue Authority (KRA) has released fresh guidelines to ensure consistency and compliance in applying tax deductions, reliefs, and exemptions under the Income Tax Act, Cap 470. The move follows amendments introduced through the Finance Act, 2025.
In a statement issued on Thursday, October 2, the authority clarified that employers are now required to automatically apply all relevant deductions and reliefs when calculating Pay-As-You-Earn (PAYE) for employees. This includes personal relief, insurance relief, mortgage interest deductions, and contributions to registered pension schemes and Post Retirement Medical Funds provided these are within the set legal limits and supported by proper documentation.
KRA emphasized that statutory deductions such as the Affordable Housing Levy and Social Health Insurance Fund (SHIF) contributions must also be factored into the employee’s taxable income. Additionally, employees holding valid tax exemption certificates will continue to enjoy exemptions, though only within the limits outlined in the law. Employers are required to validate all exemption certificates before applying them.
The authority further reminded employers that PAYE returns must be filed accurately and on time to reflect all deductions and reliefs claimed. This will ensure employee tax liabilities are correctly computed and that records remain consistent with statutory requirements.
For employees, KRA advised timely submission of relevant documentation, including receipts and exemption certificates, to enable employers to correctly apply the allowable deductions. Failure to do so may result in missed tax benefits.
Employers and employees seeking clarification have been urged to visit their nearest Tax Service Office (TSO) or contact the KRA call centre for guidance.
The new measures are expected to streamline tax compliance and reduce the burden on employees who previously had to make separate claims for some reliefs. By enforcing consistency, KRA aims to make the tax system more transparent and efficient for all stakeholders.
