Employees are expected to earn a relief of 15 percent on housing levy contributions in new proposals, which would expand the number of rebates available to four.
The 2024 Finance Bill proposed the new relief, which would marginally reduce the amount of tax payable by each employee.
“The amount of affordable housing relief shall be 15 percent of the employee’s contribution but shall not exceed Sh108,000 per annum,” reads part of the 2024 Finance Bill.
This implies that an employee earning a gross salary of Sh50,000 per month and contributing Sh750 as a housing levy shall earn a relief of Sh112.50, which shall partly offset their taxable pay.
The relief for persons earning at least Sh4 million or more per month pays a levy of Sh60,000 and will stand to benefit from a relief of Sh9,000, which is the maximum allowable in the proposal.
Employees began paying for the housing levy last year, with their contributions being matched at the same rate by employers.
Each employee and employer is obligated to pay the affordable housing levy at the rate of 1.5 percent of the employee’s total gross monthly salary, which is remitted within nine working days at the end of the month.
At present, employees qualify for three tax reliefs, including the personal relief set at a flat Sh2,400 per month or Sh28,800 annually, with the rebate seeking to lighten the tax burden.
Further, employees qualify for tax relief on their post-retirement medical fund contributions, which is set at 15 percent of the amount of the contribution paid or Sh60,000, whichever is higher.
Insurance relief is also granted to an employee who has paid insurance premiums for life or health or education policies at the rate of 15 percent of premiums paid up to a maximum of Sh60,000 per annum.
Contributions to the National Health Insurance Fund, which is expected to be transitioned to the Social Health Insurance Fund, also qualify for insurance relief at the same rate.
The affordable housing levy, legislated through the 2024 Affordable Housing Act, is meant to provide resources for the development and access to cheap housing.
According to the latest budget estimates, the Treasury expects to collect Sh54.6 billion from the levy in the fiscal year ending in June and Sh63.2 billion in the next cycle starting July 1.
Kenyans are expected to pay between Sh840,000 and Sh5.76 million for the low-cost homes programme, which aims to put up 250,000 units every year.
Affordable housing units will be made up of studios (bedsitters), and two- and three-bedroom apartments, which form one of the categories of the State-backed developments.
Social housing, a lower tier of the programme, will meanwhile comprise one, two and three-room houses targeting slum dwellers.
Additionally, the programme will oversee the development of market-driven units, which will comprise two-and three-bedroom houses.
