Wednesday, May 29, 2024 - Employees who earn less than Ksh40,000 per month are expected to pay more tax than other salaried Kenyans if the Income Tax Act is amended as proposed in the Finance Bill, 2024.
This was revealed by audit firm Deloitte and Touche LLP while making their submissions to the National Assembly.
The Bill, if approved by Parliament, will set the non-taxable limit of amounts received by an employee as payment of subsistence, travelling, entertainment, or other allowance in respect of a period of work while on official duty to 5 per cent of gross earnings.
According to the current provisions of the Income Tax, the rate is set at Ksh2,000 per day.
This means that Kenyans earning less than Ksh40,000 used to be allocated a non-taxable amount of Ksh2,000 per day, but calculating with the new percentage, that amount will reduce significantly.
For example, a person earning Ksh30,000 will only have a non-taxable limit of Ksh1,500 per day from Ksh2,000.
At the same time, the new proposal will benefit high-income earners as the non-taxable limit increases.
As a result, Deloitte and Touche LLP urged Parliament to reject the proposed amendment.
In place, they urged the National Assembly Finance Committee to replace the clause with, “where the employer has no policy or an employee’s gross earnings are below Ksh 40,000 per month, the first Ksh5,000 per day be deemed a reimbursement of the amount expended and shall be excluded in the calculation of his gains and profits.”
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