Employment Tax in Kenya

Chapter 10

Deductions Allowable from Employment Income

  1. Home Ownership Savings Plan (HOSP) (s.5()())
    An employee is elligible for a deduction upto a maximum Kshs. 4,000 per month (Kshs. 48,000 per annum) for :-

    • funds deposited by the employer in a "Registered Home Ownership Plan" (HOSP)
    • to an approved institutions. registered by the Commissioner and
    • the employee does not own interest in a permanent house

    Further interest earned on deposits upto 3 million shall be exempt from tax.
  2. Mortgage Relief (s.5(3)(b))
    Interest paid on an amount borrowed from specified financial institutions to finance either :-

    • the purchase of premises or
    • improvement of premises
    occupied for residential purposes is deductible against employment income up to a maximum of kshs. 300,000/- per annum from Jan 2017. Previously the allowable was kshs. 150,000/-. Only one residence qualifies per person.

    The specified financial insitutions are the first four(4) listed under the Fourth Schedule as follows :-

    • a bank registered under the banking Act
    • an isurance Company licenced under the insurance Act
    • a building society registered under the building societies Act
    • The National Housing Corporation
  3. Exempt Income
    Effective 1st July 2016, an employee whose marginal rate of tax, on the basic salary, is at 10% band will not be taxable on the following additional income -

    • Overtime, and or;
    • bonuses, and or;
    • retirement benefits.
  4. Group Insurance Cover s.5(2)(f)(ii)
    Premiums paid by the employer for group life policy are not taxable benefits on the employee unless it confers a benefit to the employee or any of his dependants. @2014-2024 All rights reserved
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