Super salary earners will have a monthly benefit of about Sh600 per month following the review of income tax bands and the increase in personal relief aimed at easing workers duty payment burden.
The proposals which seek to expand bands by 10 per cent and increase the personal relief from the current Sh1, 162 to Sh1, 278 per month in a review that will see those earning less than Sh25, 000 monthly gain Sh265.
Analysts reckon that the benefits from the income tax review—the first in 12 years—will be wiped out by inflation.
“The proposed increase is a welcome move but may have little impact on majority of the employees considering the prevailing high ination rates,” PWC said yesterday in its post-budget analysis
Treasury Cabinet Secretary Henry Rotich said the increase in tax bands was informed by the need to share “the good performance of the economy as widely as possible.”
At the moment, the lowest band starts at Sh10, 164 per month while the upper band falls on incomes from Sh38,893 per month.
Under the proposed changes, workers will only pay taxes if their income is at least Sh11,181.50 per month with the upper band falling on incomes above Sh42, 782.30 per month.
That means incomes of Sh11,181.50 per month will attract taxes at 10 per cent, the portion beyond the first band will attract taxes at 15 per cent up to Sh21,715 per month.
Cushion workers
The portion of incomes beyond the second band up to Sh32,249 will be taxed at 20 per cent with the rates rising to 25 per cent on incomes up to Sh42, 782.30 per month.
Any portion of income above the Sh42,782.30 falls in the upper-most band that will attract the top tax rate of 30 per cent.
“These measures are meant to cushion the workers from high cost of living and demonstrates our commitments to sharing the growth of our economy,” said Mr Rotich
A person earning Sh500,000 per month will pay income tax at a monthly rate of Sh143, 326, down from 143, 952 per month, translating to savings of Sh606. Those on Sh100, 000 pay will have a benefit of Sh606 on a tax due of Sh23, 326.
Those on 50, 000 will enjoy the biggest benefit of Sh616. On Wednesday, Mr Rotich has also proposed to eliminate taxes on bonuses, overtime and retirement benefits paid to workers who fall under the lowest income tax band.
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Credit: Business Daily
