Instalment Tax in Kenya

Meaning of Instalment Tax in Kenya?

Instalment tax is estimated income tax paid to KRA periodically, to cover the total tax payable for the year of income. Installment tax is administered under the Income Tax Act Cap 470, laws of Kenya. 

Who is eligible for Instalment Tax?

If the annual tax liability is projected to exceed Kshs. 40,000, then you should pay your tax in installments.

When do I project the tax liability for the year?

Projection is normally done at the beginning of the financial year. While projecting the annual tax liability, the expected withholding tax for the year needs to be netted off to arrive at the net estimated tax liability.

How do I structure the tax in instalments?

The Income Tax for the current year is paid on instalment basis as below;

  • 1st Instalment – by 20th of the fourth month
  • 2nd Instalment – by 20th of the sixth month
  • 3rd Instalment – by 20th of the ninth month
  • 4th Instalment – by 20th of the twelfth month

NB: Balance of Tax (return balance) to be paid by end of the 4th month after the year-end. i.e. by 30th April 2020 for December year-end cases.

However, taxpayers in the Agricultural Sector pay in instalments as follows;

  • 1st Instalment – 75% in the 9th month
  • 2nd Instalment – 25% in the 12th month.

How do I pay Instalment Tax?

Instalment tax is paid via iTax. Generate a payment slip and present it together with the cheque drawn in favor of Kenya Revenue Authority, at any of the KRA appointed banks.

Is there a penalty for late payment?

Penalty for the late payment of income tax shall apply.

 

—————————————————————————————————————————————–

 Disclaimer

The Instalment Tax article is written in general terms for guidance only and is not a substitute for professional advice or the Law. Whilst every care has been exercised in ensuring the accuracy of the information contained herein, we will not accept any responsibility for errors or omissions or for any action taken, or refraining from taking action without appropriate professional advice.

848 comments on this post

Leave a Reply

Your email address will not be published. Required fields are marked *