Understanding KRA’s New Tax Relief on Housing Levy and SHIF Contributions

The Kenya Revenue Authority (KRA) has announced that, starting this month, certain deductions from employees' salaries will no longer be subject to double taxation. Previously, contributions to the housing levy, Social Health Insurance Fund (SHIF), and post-retirement medical funds were deducted from gross salaries but still taxed under Pay As You Earn (PAYE). With the implementation of the Tax Laws Amendment Act, 2024, these amounts will now be exempt from PAYE, providing relief to salaried workers.

In addition to the above deductions, mortgage interest payments up to Kshs. 30,000 per month and pension contributions of the same amount will also be exempt from PAYE. This change is expected to increase disposable income for employees, especially those in higher income brackets who previously faced significant tax liabilities. It's important to note that while these deductions are now exempt from PAYE, previous reliefs such as the affordable housing relief and post-retirement medical fund relief have been discontinued.

For more detailed information, you can refer to the official KRA public notice on the amendments to PAYE computation.

These adjustments aim to reduce the tax burden on employees and enhance their net income, aligning with the government's efforts to support workers amid various statutory deductions introduced earlier this year.