Sometimes, dealing with taxes can feel confusing, especially with the KRA PWD Tax Exemptions issues. The tax exemption is a special tax exemption that can be overwhelming.
If you are a Person with a Disability (PWD) in Kenya, you have probably heard about this special tax exemption. Maybe you have the exemption, or maybe you do not. How does it work?
In this article, we have compiled the seven most asked questions we get about the KRA PWD tax exemptions. Our goal is to break it down into simple, clear language that is understandable by all taxpayers.
After reading that article, you will understand the KRA PWD tax exemptions, apply for the exemption, and learn how to implement the tax exemptions when granted. It is your right as a PWD to enjoy the benefits of the tax exemption.
1. What is the PWD Tax Exemption?
Think of the exemption as a tax relief. The government provides this exemption to reduce the tax burden on persons living with disabilities. It is not a separate amount of money that the person receives. It is an amount that is deducted from the taxable income.
For example, if the PWD earns a monthly salary of kshs 500,000 and has a tax exemption of the maximum amount of kshs 150,000. The kshs 150,000 will be among the money deducted to establish the taxable amount to levy PAYE.
With the tax exemptions, the PWD will end up paying less tax to the tax commissioner every month. It will help the person take more money home.
2. Who is eligible for this tax exemption?
To qualify for the tax exemption, the person must be a registered Kenyan citizen with a valid PWD card. The card is issued by the National Council for Persons with Disabilities (NCPWD). This card is essential for accessing many benefits, including this tax exemption.
For example, if the PWD is employed, the employer cannot process the tax exemption without the card. The PWD will also need to apply for the tax exemption to the tax commissioner. The exemption applies to both employed and self-employed individuals.
3. How much is the PWD tax exemption worth?
Currently, the highest monthly exemption is a significant amount of kshs 150,000. There is a wide range for the tax exemptions – from zero to kshs 150,000. The tax commissioner will decide the exemption depending on various factors, such as the salary amount.
This tax exemption amount is not fixed, but changes occasionally. It is advisable to check the latest exemption guidelines on the KRA website. It is crucial to know the exact amount because it directly affects your taxable income, which forms the basis of your tax calculations.
4. What are the steps to apply for the PWD tax exemption?
If you are registered as a PWD, you need to apply to the KRA to get the tax exemption. Here is a simple step-by-step process for the application:
Step 1: Get your official PWD card from the NCPWD.
Step 2: Apply to the KRA for the tax interview.
Step 3: Attend the interview with KRA officers.
Step 4: Get email notification from the KRA – either accepted or declined. If accepted, you will get a number.
Step 5: Provide your employer (if employed) with the tax exemption details. The KRA will also include the tax exemption details in your i-Tax ledger (it can take time).
Step 6: Your employer will update the tax details in their payroll system. They will factor in the tax exemption when calculating your Pay As You Earn (PAYE) tax each month.
It is a straightforward process, but it takes a bit of time. If you are unsure how to process it, you can always contact KRA for guidance.
5. What if I am self-employed?
The principle is the same, but the process is a little different. As a self-employed individual, you manage your own taxes. You will claim this exemption when you are filing your annual tax returns via the KRA iTax platform.
When you fill out your annual income tax return, there is a specific section for deductions and reliefs. You will input the total annual value of your PWD tax exemption there. This will reduce your overall tax liability for the year. Remember to have your PWD registration and tax exemption details ready.
6. Can I claim the exemption if I have more than one job?
Many people have one job. But if you are lucky and have two jobs, you can only claim the PWD tax exemption against one source of income. You must choose which employment you want it applied to.
Claiming the tax exemption on two different jobs will mean that you are claiming more than your allowed tax exemption amount.
For example, if you have been allocated the highest amount of kshs 150,000. If you claim in two jobs, you will claim kshs 150,000 X 2 = kshs 300,000.
This action will land you in trouble with the tax commissioner. You will be fined, penalized, and pay interest. By claiming the correct amount of tax exemption, you will be tax compliant.
7. Why is understanding the PWD tax exemption crucial for tax compliance?
Tax compliance is not just about paying what you owe. It is also about claiming the correct tax reliefs and exemptions you qualify for. By claiming your PWD tax exemption, you are actually ensuring your tax records and documents are accurate and complete.
You are legally entitled to this tax benefit. Using the PWD tax exemption correctly means you are following the tax laws. It keeps you on the right side of the tax commissioner. And it also puts more of your hard-earned money back in your pocket. It is a win for you as a taxpayer and for the tax commissioner.
Your Next Step to Full Compliance
Understanding your rights is the first step. Taking action is the next step. Getting your finances in order brings peace of mind and unlocks opportunities.
Feeling a bit stuck? You may have started the process, but hit a snag with the paperwork. You do not have to figure it out alone.
Let us help you navigate the tax compliance process with confidence. Click HERE to contact us. We will review your situation and ensure you claim every benefit you deserve.
Other Related Articles:
a. How to Apply for NCPWD card – HERE
b. Understanding PAYE in Kenya – HERE
c. How to apply for PWD Tax Exemption (documents) – HERE
d. KRA PWD Tax Exemption application – HERE
e. Corporate income tax questions answered – HERE
