I recently came across installment tax in Kenya and realized many people don’t fully understand how it works or how to pay it. If you run a business or earn income not fully taxed under PAYE, this is something you must handle correctly.
At first, the process on iTax can seem confusing. So here’s a simple guide that explains how installment tax works and how to pay it without stress.
Quick Answer
To pay installment tax in Kenya, log into your iTax account, register a payment under installment tax, generate a payment slip, and pay through a KRA-approved bank.
Step-by-Step: How to Pay Installment Tax in Kenya
1. Log in to your iTax account
Go to the KRA iTax portal and enter your PIN and password.
2. Go to Payment Registration
Once logged in, navigate to the payment section.
3. Select installment tax
Choose installment tax as the tax obligation.
4. Fill in the required details
Enter:
- Tax period
- Amount payable
- Payment method
Make sure the information is accurate.
5. Generate the payment slip
After filling the form, generate a payment slip.
6. Make the payment
Take the payment slip to a KRA partner bank and pay via:
- Bank deposit
- Cheque (in favor of Kenya Revenue Authority)
How Installment Tax is Calculated
1. Prior Year Basis
Use the previous year’s tax and apply the required percentage.
2. Current Year Basis
Estimate your current year income and calculate expected tax.
Installment tax is usually paid in four equal installments during the year.
Extra Tips and Best Practices
- Do your tax projections early in the year
- Keep records of all payments
- Use the correct calculation method
- Pay on time to avoid penalties
- Consult a tax expert if unsure
Common Mistakes to Avoid
- Missing installment deadlines
- Entering wrong tax amounts
- Not generating a payment slip
- Ignoring withholding tax adjustments
- Underestimating income projections
FAQ
Who should pay installment tax in Kenya?
Anyone with tax liability not fully covered by PAYE exceeding KSh 40,000.
How many times is installment tax paid?
It is paid in four equal installments annually.
What is the penalty for late payment?
A penalty of 20% of the unpaid installment tax amount.
Conclusion
Paying installment tax in Kenya is straightforward once you understand the process. Use iTax correctly, make payments on time, and keep proper records to stay compliant and avoid penalties.
