Taxes play a vital role in funding public services and infrastructure, actually, tax is the primary source of funding for the government.
However, not everyone is required to contribute tax, the Kenya Revenue Authority (KRA) has implemented various tax exemption programs to support specific individuals or organizations, providing them with financial relief.
In this article, we will explore different groups of people who are exempted from paying income tax and how to be exempted from paying this tax.
What is income tax
Income tax is a tax charged for each year of income, on all the income of a person whether resident or non-resident, which is accrued in or was derived from Kenya.
Income tax is imposed on;
- Business income from any trade or profession
- Employment income
- Rent income
- Dividend and Interests
- Pension income
- Income from a Digital Marketplace
- Natural resource income among others
People living with disabilities
Employees living with disabilities are entitled to a tax exemption on all remuneration gained from employment plus other types of taxable income under certification of the Kenya Revenue Authority (KRA).
The exemption applies to people who earn below Sh150, 000 per month or for their first Sh1,800,000 per year.
Qualifications for tax exemptions for PLWDs
People with disabilities can get tax exemptions as long as they meet the following qualifications:
- They must be registered with the National Council for Persons with Disabilities
- They must possess a disability assessment report that conveys the nature of the disability
- They must receive income subject to taxation under the Income Tax Act.
- They must undergo an assessment by a committee and obtain a recommendation. The committee consists of officials from NCPWD, KRA, and the Ministry of Health.
All persons with disabilities need a tax exemption certificate to enjoy the benefits. The tax exemption certificate is proof PWDS can present to employers or local authorities for exemption.
The following are the documents required to get a an exemption certificate.
- KRA Pin Certificate
- Tax compliance certificate
- Original letter from the employer stating the nature of the disability and how it affects the employee’s productivity in the workplace (where applicable).
In the event of a renewal, a copy of the expired certificate is required.
Low-income earners
KRA has set a personal income tax threshold to ensure that individuals with low earnings are not burdened with income tax obligations.
As of the current regulations, individuals earning monthly income below Sh24,000 are exempted from paying personal income tax.
This provides relief to this group of tax payers, enabling them to meet their basic needs and improve their financial stability.
Non-profit organizations
Nonprofit organizations are often exempted from paying taxes by KRA due to their charitable or public service nature. These organizations include charitable foundations, religious institutions and non-government organisations.
However, the only NGOs exempted from income tax are the ones offering relief poverty, handling public distress, or involved in advancement of education and religion
By granting tax exemptions, governments aim to support their efforts in addressing societal needs and providing essential services to communities. The tax exemptions allow these organizations to channel more resources towards their missions, fostering positive social impact.
However, to qualify for exemption there is need for clearance by the National Council of NGOs and KRA as well.
It is however important to note that even if you are exempted from personal tax, you are required to file your returns or face penalties.