Teachers, principals, civil servants to enjoy tax relief
Thousands of school teachers, principals, civil servants and private sector employees will enjoy lower taxes from January as the government effects changes to the income tax law.
Employees will also get higher personal relief — the amount returned to workers after tax every month.
There are also proposals for eliminating taxes on bonuses, overtime and retirement benefits paid to workers who fall under the lowest income tax band though there is no mention of how this will be effected in the circular sent to companies.
From January 1, next year, personal relief will be raised from the current Sh13,944 per year (Sh1,162 per month) to Sh15,360 per year (Sh1,280 per month).
EXEMPTED FROM DEDUCTION
Treasury has notified human resource departments across the country to effect the changes from January.
The bottom of the scale workers who currently earn Sh10,164 per month, mainly cleaners, subordinate staff, messengers and other low cadre staff, and pay a total income tax of Sh1,016, will now be fully exempted from the deduction as the lowest taxable bracket now climbs to Sh11,180 per month.
Those earning Sh38,893 — mainly entry level graduate employees in the public sector and which is the current starting point of the highest band where a 30 per cent income tax is applicable, will also enjoy a reduction as the highest rate now will now touch those earning Sh42,782 and above.
“Effective 1st January 2017, annual tax bands should be expanded by 10 per cent and a personal relief increased from the current Sh13,944 per annum (Sh1,162 per month) to Sh15,360 per annum (Sh1,280 per month),” reads the circular sent to companies and organisations.
LOWEST INCOME BRACKET
The reliefs, which were first announced by Treasury Cabinet Secretary Henry Rotich in the 2016/2017 budget, were designed to create comfort for those whose taxable employment income before bonus and overtime allowances does not exceed the lowest band, which is Sh10,164 per month or Sh121,960 per year.
The first band will be deducted at 10 per cent, rising in the series of taxable income that terminates at 30 per cent at the highest band, which is now put at a minimum of Sh513,373 per year or Sh42,781 per month.
Tax expert Nikhil Hira said the move was a “step in the right direction” but called for frequent revisions of the bands to keep pace with the changing cost of living in the country.
“This is definitely meant to create the biggest impact on those in the lowest income bracket whose monthly personal relief will also go up. Those in upper income level will, however, not feel it much because relative to their income in the graduated scale, they will only be claiming more relief.
To read more click on the link: Tax break puts more money in your pocket.