TSC Teachers’ T-Pay Payslip New Deductions

By | September 25, 2023
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The latest TSC T-Pay News indicate that teachers will suffer another blow following the directive below.

Teachers and other salaried employees face potential income reductions if a Treasury proposal to eliminate tax reliefs on pay-as-you-earn (PAYE) taxes is approved.

Educators and other workers currently receive a personal tax relief of Sh2,400, which is typically shown on their monthly pay statements. The Treasury’s newly released medium-term revenue strategy aims to reassess existing tax relief on employment earnings to maximize revenue collection.

The Treasury argues that while tax incentives can influence taxpayer behaviour, they come at a cost in terms of lost tax revenue and make the tax system more complex. Studies suggest that these incentives may not always be effective in influencing behaviour.

Currently, salaried workers benefit from two types of PAYE tax reliefs, including the Sh2,400 monthly personal relief for resident individuals, designed to reduce the tax burden.

Additionally, salaried workers who pay insurance premiums for life, health, or education policies for themselves, spouses, or children can claim a 15 per cent relief, up to a maximum of Sh60,000 annually. These policies must have a maturity period of at least 10 years to qualify.

Starting last year, contributions to the National Hospital Insurance Fund (NHIF) became eligible for insurance relief.

The Treasury’s proposal to eliminate one or all of these tax reliefs has raised concerns among tax experts. They believe it would further impact the disposable income of households already adjusting to the newly introduced housing levy and higher deductions to the National Social Security Fund.

To address this, the Treasury has suggested mitigating measures, including introducing a new PAYE tax band at zero per cent for low-income earners.

Simultaneously, the government is considering reducing the top PAYE tax rate from 35 per cent to 25 per cent to prevent tax avoidance and evasion, following the introduction of new tax bands in the 2023 Finance Act.

These changes could have significant implications for various income groups, with most employees in Kenya earning less than Sh100,000 per month and some not paying PAYE taxes at all due to the existing personal relief.

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