Kenya Kwanza has handed pensioners a major relief after agreeing to raise the amount of taxable pension savings by 50 per cent from Sh20,000.
This means that savings of up to Sh30,000 in retirement schemes will be exempted from tax if the National Assembly approves the move.
The 50 per cent rise is contained in the Finance Bill, 2024 which was considered by the Kenya Kwanza PG on Tuesday.
The meeting at State House agreed on a raft of other taxa reviews to alleviate Kenyans from the high cost of living while securing their future.
" To support our pension contributions, because we will one day all of us retire, we are increasing the amount allowable for tax exemptions from sh20,000 per month to Sh30,000 per month,'' said Molo MP Kimani Kuria.
Briefing the country after the State House meeting, Kuria said the incentive was a major boost to Kenyans seeking to save more for their pension.
''We are now moving our pension schemes to exempt, exempt, exempt at contribution and exempt when you receive your pension,'' he said.
The amount is pension contributions are made by employees to registered pension schemes and provident funds.
The adjustment aims to encourage individuals to save more for their retirement while enjoying tax benefits.
However, it’s crucial to note the conditions for tax exemption.
The tax-exempt contributions made by an employee are capped at the lesser of the total contributions, 30 per cent of the employee’s pensionable income, or Sh360,000 annually.
Contributions exceeding these limits will be subject to income tax.
Furthermore, if both an employee and employer’s combined contributions exceed Sh30,000 in a month, the entire employer’s contribution will be non-deductible for the employer’s income tax liability.
