KRA Insists No Tax Relief From SHIF Deductions
The Kenya Revenue Authority (KRA) has dashed Kenyans’ hopes of taking home a higher net pay after Social Health Insurance Fund (SHIF) deductions.
In an official statement, the KRA sought to clarify a previous proposal by the Treasury Ministry that suggested deducting SHIF and Affordable Housing contributions before calculating an employee’s taxable income.
Treasury CS John Mbadi proposed that the deductibles be deducted from workers’ gross salaries before taxation, resulting in higher take-home pay for Kenyans.
“The Bill proposes to amend the Income Tax Act to provide that the following amounts shall be allowable deductions in the computation of taxable income of individuals: contributions to the Social Health Insurance Fund (SHIF),” the Treasury stated in a preview of the proposed Tax Laws (Amendment) Bill, 2024.
KRA has clarified that the insurance relief provided under the Income Tax Act does not apply to SHIF contributions.
— The Tax Lawyer® (@wakili_dennis) November 8, 2024
A deduction of SHIF contributions for tax purposes will be available once the Tax Laws (Amendment) Bill 2024 is enacted into law.
This means that until the Bill… https://t.co/vssf4qE1Ff pic.twitter.com/JGeFcredgc
KRA has revealed that this insurance relief does not apply to deductions made towards the SHIF under Section 31 of the Income Tax Act on Insurance.
Section 31 of the Income Tax Act allows for personal tax relief, including contributions to health insurance plans.
Amendments to this section, effective January 2022, allow taxpayers to claim relief for contributions made to the National Hospital Insurance Fund (NHIF).
This amendment applies to both health insurance policies that begin on or after January 1, 2007, and contributions to the NHIF that qualify for tax relief.
Employees can receive up to Ksh255 per month in relief, which is 15% of their NHIF contribution of Ksh1,700.
“The relief as currently provided under the income tax does not apply to contributions made to the SHIF under the Social Health Insurance Act,” KRA clarified in the notice.
According to KRA, the Treasury CS proposed relief for the NHIF deductions, which were replaced by the SHA on October 1, 2024.
“The relief as provided refers to the NHIF under the National Health Insurance Fund Act, which was repealed by the Social Health Insurance Act,” KRA clarified.
Clarification on the applicability of insurance relief to contributions made to SHIF.
— Kenya Revenue Authority (@KRACorporate) November 8, 2024
The proposed changes in the Tax Laws (Amendment) Bill, 2024 aim to allow deductions for contributions to the Social Health Insurance Fund (SHIF) against taxable income.
Currently, insurance… pic.twitter.com/g6vuaNtMpg
KRA has acknowledged that the Tax Laws (Amendment) Bill, 2024, proposes an amendment to the law to allow for the deduction of SHIF contributions from taxable income.
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Under the new contributions, SHA directed that all employers deduct a monthly statutory deduction contribution to the Social Health Insurance Fund at a rate of 2.75 percent of the household’s gross salary or wage by the 9th of each month.
According to SHA. The gross salary or wage for a household whose income comes from salaried employment includes the basic salary and allowances paid to an employee on a regular basis.
Following this clarification, Kenyans who hoped to save some coins despite their contributions will have to wait a little longer.
Kenyans have lamented tough economic times, particularly as SHIF deductions continue to reduce their pay stubs.
KRA Insists No Tax Relief From SHIF Deductions
