Bill proposes to give workers 15pc relief on Housing Levy deductions

Tax relief

The Finance Bill 2024 proposes a new relief, which would marginally reduce the amount of tax payable by each employee.

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Employees are expected to get a relief of 15 per cent on Housing Levy contributions in new proposals that would expand the number of rebates available to four.

The Finance Bill 2024 proposes a new relief, which would marginally reduce the amount of tax payable by each employee.

“ The amount of affordable housing relief shall be 15 per cent of the employee’s contribution but shall not exceed Sh108,000 per annum,” states the Bill.

This implies that an employee earning a gross salary of Sh50,000 per month and has a Housing Levy contribution of Sh750 shall earn a relief of Sh112.50. Persons earning at least Sh4 million or more per month paying a levy of Sh60,000 will stand to benefit from a relief of Sh9,000 which is the maximum allowable in the Bill.

Tax reliefs

Employees began paying 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 per cent of the employee’s total gross monthly salary, and it is remitted within nine working days after 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. Further, employees qualify for tax relief on post-retirement medical fund contribution, which is set at 15 per cent of the amount paid or Sh60,000, whichever is higher. Insurance relief is also granted to an employee who has paid insurance premiums for life, health or education policies at the rate of 15 per cent of premiums paid up to a maximum of Sh60,000 per annum.

Contributions to the National Hospital Insurance Fund, which is set to transition to the Social Health Insurance Fund (SHIF) also qualify for insurance relief at the same rate.

Affordable Housing Act 2024

The Housing Levy, which became law through the Affordable Housing Act 2024, is meant to provide resources for development of cheap housing.

According to the latest budget estimates, the National Treasury expects to collect Sh54.6 billion from the levy in the fiscal year ending in June and a further Sh63.2 billion in the next cycle starting July 1.

Kenyans are expected to pay between Sh840,000 and Sh5.76 million for low-cost homes under the programme that targets to put up 250,000 units a year.

Affordable housing units will be made up of studios (bedsits), two-and three-bedroom apartments, forming one of the categories of the State-backed developments. Social housing, a lower tier of the programme, will comprise one-, two- and three-room houses targeting slum dwellers. Additionally, the programme will oversee the development of market-driven units that will comprise two-and three-bedroom houses.