How KRA Calculates PAYE Tax on Your Payslip

In Kenya, Employees are subject to various income taxes, with Pay As You Earn (PAYE) tax being the main one. The Kenya Revenue Authority (KRA) defines PAYE as a system of tax collection where employers deduct tax from an employee’s pay and remit directly to the authority.
Employers must take the tax from salary,file a PAYE return and send the money to KRA every month.
According to the authority, PAYE tax is charged on cash pay and some non-cash benefits. This includes wages, salaries, bonuses, overtime and commissions.
Certain benefits like housing or a car can also add to taxable pay when they go over the allowed limits.
KRA charges PAYE tax using bands. Since 1 July 2023 the monthly pay bands are: the first Ksh24,000 at 10 percent, the next Ksh8,333 at 25percent, the next Ksh467,667 at 30 percent, the next Ksh300,000 at 32.5 percent, and any income above Ksh800,000 at 35percent.
Every resident also gets a personal tax relief of Ksh2,400 per month, which is Ksh28,800 per year which lowers the PAYE.
For example, if a worker has taxable pay of Ksh100,000 in a month,PAYE is worked out step by step.
On the first Ksh24,000, the tax is 24,000 × 10 percent = Ksh2,400. On the next Ksh8,333, the tax is 8,333 × 25 percent = Ksh2,083.25.
The remaining amount is 100,000 − 24,000 − 8,333 = 67,667 and this is taxed at 30 percent → 67,667 × 30 percent = Ksh20,300.10.
Total tax before relief is 2,400 + 2,083.25 + 20,300.10 = Ksh24,783.35. Subtract personal relief of Ksh2,400 and the PAYE tax due is about Ksh22,383.
Other items can also change the taxable amount as non-cash benefits and large allowances can add to taxable pay.
Allowed deductions such as approved pension contributions, mortgage interest (within limits), and the Affordable Housing Levy reduce taxable pay. Also, other statutory deductions like NSSF and SHIF will lower net pay after PAYE is taken.
According to KRA, employers must file PAYE returns and remit the tax to the authority on or before the 9th day of the following month. Late filing or late payment can attract penalties.
Workers should check their payslips every month to confirm gross pay, each deduction, and the PAYE taken.
“Employers are required to deduct tax (PAYE) from their employees’ emoluments at the prevailing Individual Income Tax Rates and remit the amounts deducted to KRA on or before the 9th day of the following month. A PAYE return should also be filed through iTax on or before the 9th day of the following month,” KRA stated.