How To Pay Installment Tax in Kenya.
This guide focuses on how to pay installment tax in Kenya. Installment tax is an estimated income tax paid to the Kenya Revenue Authority (KRA) periodically in anticipation of the tax payable for a year of income. It is a form of advance tax administered under the Income Tax Act Cap 470, Laws of Kenya.
What is Installment Tax?
Installment tax is paid in advance in four equal installments before the year of income is over and before the business accounts are prepared to establish the actual tax payable. It is applicable to individual taxpayers with a tax liability not fully covered under PAYE (Pay As You Earn) of over Kshs 40,000 payable for any year. The tax liability projection is usually done at the beginning of the financial year, taking into account the expected withholding tax for the year to determine the net estimated tax liability.
How to Calculate Installment Tax
There are two methods to calculate installment tax:
1. Prior Year Basis
In this method, the prior year’s tax payments are multiplied by 100 and 10%.
2. Current Year Basis
This method is used for new businesses or those that were in losses and turned profitable. The installment tax is determined by estimating the current year’s profit and the tax payable on it.
Steps to Pay Installment Tax
- Log in to iTax: Visit the KRA iTax portal and log in using your credentials.
- Payment Registration: Click on the “Payment Registration” option.
- Select Installment Tax: Choose “Installment Tax” from the payment options.
- Fill in Required Details: Complete the form with the necessary information.
- Generate a Payment Slip: Generate a payment slip for the installment tax.
- Make Payment: Present the payment slip along with a cheque drawn in favor of the Kenya Revenue Authority at any partner bank.
Penalty for Late Payment
The penalty for late filing and payment of installment tax is 20% of the difference between the amount of installment tax payable for a year of income and the installment tax actually paid.
Contact KRA
For any inquiries or assistance, you can contact KRA:
- Phone: +254 20 4 999 999, +254 711 099 999
- Email: callcentre@kra.go.ke
Paying installment tax ensures that you are compliant with tax regulations in Kenya and helps in managing your annual tax liabilities efficiently.
How To Pay Installment Tax in Kenya