Installment tax is an estimated income tax that taxpayers pay periodically to the Kenya Revenue Authority (KRA) in anticipation of the final tax liability for the year. It is required for individual taxpayers with an annual tax liability exceeding Ksh 40,000, not fully covered under PAYE. The tax is paid in four equal installments, in advance of the year-end, before the actual financial accounts are prepared.
How to Calculate Installment Tax
There are two main methods to calculate installment tax:
- Prior Year Basis:
- Taxpayers calculate the installment tax based on the tax paid in the previous year, adjusted by adding 10%.
- Current Year Basis:
- This method is suitable for new businesses or businesses that were previously making losses but have turned profitable. It requires an estimation of the current year’s profit and the corresponding tax liability.
How to Pay Installment Tax
To pay installment tax, follow these steps:
- Log in to iTax:
- Access your KRA iTax account using your credentials.
- Click on “Payment Registration”:
- Select the option to register your payment.
- Select Installment Tax:
- Choose “Installment Tax” from the tax options available.
- Fill in the Required Details:
- Enter all necessary information, including the amount and period.
- Generate a Payment Slip:
- After completing the form, generate a payment slip.
- Make Payment at a Partner Bank:
- Present the payment slip along with a cheque drawn in favor of the Kenya Revenue Authority at any partner bank.
Penalty for Late Payment
If the installment tax is not paid on time, a penalty of 20% of the difference between the due installment tax and the amount paid is charged.
KRA Contacts:
- Phone: +254 20 4 999 999 / +254 711 099 999
- Email: [email protected]
For further inquiries or assistance, you can reach out to the KRA through the provided contacts.
