For those tapping into pension before turning 50, the first Sh600,000 is for free while Sh466,704 is taxed at between 10 percent and 25 percent, leaving the balance to be taxed at 30 percent.
The Treasury was proposing an exempt-exempt-exempt structure for pension. This would have meant that contributions towards pension, investment income generated from pension contributions and withdrawals by the contributors are all exempted from tax.
Savings of up to Sh30,000 per month in retirement benefit schemes will be exempted from tax if Parliament passes the proposal that seeks to raise the figure from the current Sh20,000.
The proposed 50 percent rise in the figure is contained in the Finance Bill 2024, which seeks to amend section 5 of the Income Tax Act that allows Kenya Revenue Authority to exempt from tax up to Sh240,000 annual income contributed as pension in retirement schemes.
