statutory deductions

Do statutory deductions offer any benefit?

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 from employees’ salaries, any amount as a contribution to any fund or scheme approved by the commissioner of labor to which the employee has agreed to contribute. 

Who is deducted PAYE?

 PAYE is one of the mandatory Statutory Deductions. Everyone with the exception of those people who are self-employed is supposed to be taxed PAYE. The amount to be deducted is based on the monthly income of an employee.

As an employer, you are supposed to submit your PAYE returns online via iTax. Late payments attract a penalty of KES 10,000 charged to the employer.

PAYE calculator will assist you in the calculation of PAYE given the taxable pay.

Are NSSF & NHIF mandatory?

Similarly, NHIF (National Hospital Insurance Fund) and NSSF (National Social Security Fund) are mandatory statutory deductions that an employer collects and remits to the relevant statutory bodies on behalf of an employee. Both statutory deductions have rates that are observed during calculations. They are based on the gross income of an employee.

What about students?

Under the Higher Education Loans Board Act 1995, the Higher Education Loans Board is another statutory deduction for students who take 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 adhere 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.
  • Deduct from the wages or remuneration of the loanee the amount of any loan as instructed by the Board.
  • Remit 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 fails to comply with the provisions of subsection (4) on deductions, will be committing an offense and shall on conviction 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 fail to comply with any of its many provisions, including late remission of statutory contributions and issuance of bounced cheques.

KRA P9 form

A P9 is a form issued to the employee by employers containing total compensation received in a year and it includes the following: basic salary, gross salary, allowances, pension contribution, PAYE charged, and personal relief entitlement.

The P9 form facilitates the filing of individual returns. As an employer, you are obligated to provide your employees with the form. Although, you can easily download the form online via iTax at https://itax.kra.go.ke.

Steps for filing the P9 form

  1. Visit the iTax portal and log in using your iTax password and KRA PIN number.
  2. After logging in, the iTax dashboard will be displayed and here click on the returns tab.
  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. The required info includes:
  • Basic info such as name, occupation e.t.c
  • Employment Income
  • Details of PAYE deducted
  • Tax Computation

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

     7. After submitting you can easily print a KRA ereturn Acknowledgement Receipt.

Filing Tax Returns

A tax return is a documentation filed with a taxing authority that reports income, expenses, and other relevant financial information.

There are various tax returns that are supposed to be filed 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.

 

  • Now that you know this

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. WorkPay helps in filing your statutory deductions flawlessly.

Read more on How you can manage your monthly deductions easily or perhaps How to avoid risks of delayed salary payments or even How the future of human resources looks like?