Statutory and Legal

Do statutory deductions in Kenya offer any benefit?

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Who is taking your money and why?

According to Labor laws Section 19 (1) of the employment act, an employer is allowed by law to deduct statutory deductions in Kenya from employees’ salaries.

Any of this amount contributing to any fund or scheme approving by the commissioner of labor to which the employee is agreeing to contribute.

Who is deducting PAYE?

 PAYE is one of the mandatory statutory deductions in Kenya. However, the amount to be deducting is as a result coming from  the monthly income of an employee.

As an employer, requiring to be submitting your PAYE returns online via iTax and most importantly on time. As late payments attract a penalty of KES 10,000 charged per year to the employer.

Above all, investing your time in a free PAYE calculator will be assisting you in the calculation of PAYE.

Are NSSF & NHIF mandatory in Kenya?

Similarly, NHIF (National Hospital Insurance Fund) and NSSF (National Social Security Fund) are mandatory statutory deductions. That an employer keeps collecting and remitting to the relevant statutory bodies on behalf of an employee.

Both statutory deductions in Kenya have ratings that are observing calculations.

What about students?

Under the Higher Education Loans Board (HELB) Act 1995, the Higher Education Loans Board is another statutory deduction in Kenya for students who are taking loans while in college. A loanee is given a grace period of one year to start repaying the loan.

Under the employers’ obligation, the Act demands that as an employer one should be adhering to the law by:

  • Disclosing Loanees: Here you are required to inform the board that you have employed the loanee within three months from the date of employment.
  • Deducting from the wages or remuneration of the loanee the amount of any loan as instructed by the board.
  • Remitting this amount to the Higher Education Loans Board as a loan repayment deduction.

What if you fail to adhere to the deductions above?

The ACT clearly states that any employer who is failing to comply with the provisions of subsection (4) on statutory deductions in Kenya, will be committing an offense.

On conviction he or she will be liable to a fine not exceeding one hundred thousand shillings or to imprisonment for a term not exceeding two years, or to both.

On this note, the National Social Security Fund (NSSF) published regulations that have set hefty fines for employers who are failing to comply with any of its many provisions, including late remission of statutory contributions and issuance of bounced cheques.

What about KRA P9 forms?

A P9 is a form issuing to the employee by employers containing total compensation one is receiving in a year including the following:

  • Basic salary
  • Gross salary
  • Allowances
  • Pension contribution
  • PAYE charged
  • Personal relief entitlement.

The P9 form facilitates the filing of individual returns.  Also, as an employer, you are obligated to providing your employees with the form. On the other hand, you can easily be downloading the form online via iTax at https://itax.kra.go.ke .

Steps for filing P9 forms:

  1. Visiting the iTax portal and logging in using your iTax password and KRA PIN number.
  2. After logging in, the iTax dashboard will be displayed.
  3. Select your tax obligation either resident or non-resident. In this case, it is a resident individual since you are filing for Kenyan residents with employment income. 
  4. Download the Income Tax Resident Individual form(Excel).
  5. Fill in the required tabs. For instance; basic info such as name, occupation e.t.c, employment income, details of PAYE deducted, tax computation.

     6. Upload the income tax resident individual excel form and submit for processing.

     7. After submitting you can easily print a KRA e-return Acknowledgement Receipt.

Filing Tax Returns:

Firstly, a tax return is a document filed with a taxing authority that is reporting income, expenses, and other relevant financial information.

Secondly, there are various tax returns that individuals and organizations are supposed to be filing in Kenya.

Before filing any return, there are a few things that one needs including:

  1. Your KRA PIN and password to help you access the online KRA portal
  2. Employer information if you are employed.
  3. The employer’s information should include his or her KRA PIN. Also, your employer should provide you with the P9 form as it contains almost all the information you need to file returns.
  4. All financial information should be close.
  5. Withholding tax certificates, if needed.
  6. Any relevant documents regarding claims for deductions or income received.

Guide on how to file returns:

  1. Visit online KRA portal at https://itax.kra.go.ke
  2. At the login page enter your KRA PIN number, password and answer the security question.
  3. Click on “Returns” then click “File Returns”
  4. Select the type of tax obligation applicable to you then click next.
  5. This page takes you through the filing process. Click on the links provided to download the tax return forms in Excel.
  6. Fill the necessary information in the downloaded form and save it.
  7. Enable macros for validation and zipping of your file.
  8. Return to the iTax page and select the period in which you are filing the returns, upload the zipped form you saved, agree on the terms of service then click submit.

 

What’s more on statutory deductions in Kenya?

To sum up, with the introduction of iTax, taxpayers can file tax returns as long as they have the credentials needed that is, the KRA PIN and password. Early filing of returns helps you avoid the late penalty of up to Ksh. 20,000 for late filing. 

Read more on Easy steps on How to get a P9 form in Kenya or Benefits of electronic payslips and how to get them NOW! 

 

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