KRA Instructs 1.5% House Levy Deduction From Gross Pay With Arrears
KRA Instructs 1.5% House Levy Deduction From Gross Pay With Arrears. Teachers, government employees, and other workers will contribute 1.5% of their gross salaries to the housing fund.
The tax will be retroactive until July 1, 2023. The same sum will be contributed by employers on behalf of their workers.
The hidden cost to employees of the contentious tax that goes into effect this month is made clear by the taxman’s directive to companies to utilize gross pay when determining what to deduct from employee wages as a housing charge.
The Kenya Revenue Authority (KRA) will now require that allowances provided to personnel, such as hardship, commuter, etc., be included when completing monthly computations, an order that has shocked human resource departments.
The housing fund was included in the initial draft of the Finance Bill but not the allowances.
Government employees anticipate receiving a pay raise in August.
A 7–10% compensation increase for civil personnel was announced by the Salaries and Remuneration Commission (SRC), with effect from July 1.
For the fiscal year 2023–2024, the increase will cost taxpayers Ksh21.7 billion extra, with Ksh9.5 billion going to teachers.
SCR estimates that the average rise over a two-year period will be 7 to 10%, including the current notch increase, which typically increases by 3% annually.
“Where the salary structures are frozen, the notch increase will continue as budgeted up to the maximum salary point,” SRC said.
Executive state officers will receive Ksh126.9 million of the Ksh21.7 billion, while Parliamentary state officers will receive Ksh78.9 million.
State employees in the judiciary will receive Ksh308.2 million, county state employees Ksh408.9 million, and civil servants Ksh1.8 billion.
County governments will receive Ksh4.1 billion, and uniformed and orderly forces would receive Ksh4.5 billion. Other government employees will receive Ksh745.6 million.
“A major factor in the rise in the pay bill’s overall amount is an increase in the number of employees. In order to obtain the appropriate ratios for efficient service delivery, the government will continue to hire in important sectors like teaching, healthcare, and security as a developing country. However, an increase in personnel numbers is not always linked to the provision of key services, according to SRC.
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