This article focuses on how to pay installment tax in Kenya. Installment tax is estimated income tax paid to KRA periodically in anticipation of the tax payable for a year of income. It is a form of advance tax administered under the Income Tax Act Cap 470, laws of Kenya.
Installment tax is paid in advance at four equal installments. It is paid before the year of income is over and before the accounts of the business are prepared to establish the actual tax payable.
The tax is paid by individual taxpayers who have a tax liability, that is not fully covered under PAYE of over Kshs 40,000 payable for any year. Projection is normally done at the beginning of the financial year. While projecting the annual tax liability, the expected withholding tax for the year is netted off in arriving at the net estimated tax liability to use in determining installment taxes payable.
How to Calculate Installment Tax
There are two ways to calculate installment tax;
(i). Prior Year Basis
For this method, prior tax payments are multiplied by 100 and 10%.
(ii). Current Year Basis
In this method, especially for new business or those who were in losses and turned to profitability, installment tax is determined by estimating the current year profit and tax payable thereon.
How to Pay Installment Tax
- Log in to iTax.
- Click on Payment Registration.
- Select installment tax.
- Fill in the required details.
- Generate a payment slip and present it together with the cheque drawn in favour of Kenya Revenue Authority, at any of the partner banks.
Penalty for Late Payment of Installment Tax
- The penalty for late filing and payment of installment tax is 20% of the difference between the amount of installment tax payable in respect of a year of income and the installment tax actually paid.
KRA Contacts
Phone: +254 20 4 999 999 , +254 711 099 999;
Emaail: callcentre@kra.go.ke
