Employers failing to provide tax exemptions and reliefs to employees during payroll deductions can result in employees being owed tax refunds. When filing individual tax returns, if an employee's actual tax liability is less than taxes paid, they are due a refund. Common reasons for refunds include employers not granting disability exemptions, insurance reliefs, mortgage interest deductions, or monthly personal reliefs. To apply for a refund, individuals log into the iTax portal and submit a claim along with required documents like deduction cards or certificates. Refunds are then analyzed and paid out once approved.

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Income Tax Refunds

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Introduction
This presentation will focus on how not effecting exemptions/reliefs
during payroll leads to refunds.

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What is a tax refund?
 A tax refund is a reimbursement of excess tax paid in a given
period.

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How a tax refund comes about
A refund occurs when the tax liability is less than the taxes paid
When an employer fails to provide an employee with relief(s)
during PAYE calculation, the employee will fall on a refund
position when filing their individual income tax return at the end
of that particular year.

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How a tax refund comes about contd’
Persons with Disability (PWDs) are granted tax exemption on
their monthly or annual income by the employer.
 This exemption applies to the first Kshs. 150, 000 per month or
for the first Kshs. 1.8 M per annum.
 Failure to provide these exemptions will lead to refunds accrued
to the respective employee for the said year.

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How a tax refund comes about contd’
Also, a person who has paid tax deducted at source in excess of
final liability will fall on a refund position when filing their return
for the year.

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Application for refunds
One applies for the refund immediately after filing a tax return for the
respective year, as follows;
Log in to iTax portal using PIN and password.
Select Refunds>Income Tax and fill in the bank details tab.
 On the Claim details tab, select the refund type (normal).

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Application for refunds contd’
The system automatically populates the refund due for all the years.
Check the box with the year you want to apply for, indicate the
refund claim reason then submit.
An acknowledgement receipt will be generated that will be used by
the taxpayer to fast-track the progress of the application.

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Refund follow up
Refund claiming is a structured process which needs to be validated by
a Refunds Analysis officer before the refund is paid.
However, one can track the status of their refund application via their
iTax page by using their reference number.

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Refund follow up contd’
The procedure is as follows;
Click on useful links>select status of application>fill the required
fields accordingly and click on consult.
On can also reach the Refunds & Claims office on 020 281 5056 for
further guidance.

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Reliefs
Some of the reliefs include;
Insurance relief
Mortgage relief
Monthly Personal Relief

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Insurance relief
The employer is required to grant relief to any employee who has
insurance policies on life and education for the individual, his wife or
child. Relief is to be given at 15% of premium paid up to a maximum of
ksh. 60,000 per annum. Also, the policy maturity period must be of at
least 10 years. Failure to grant this relief results in refunds for the
employee.

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Mortgage relief
The employer is required to grant relief to any employee who has
insurance policies on life and education for the individual, his wife or
child. Relief is to be given at 15% of premium paid up to a maximum of
ksh. 60,000 per annum. Also, the policy maturity period must be of at
least 10 years. Failure to grant this relief results in refunds for the
employee.

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Mortgage relief
An employee with a mortgage from specific financial institutions (as
listed on the 4th schedule on Income Tax Act) who has not been
granted relief by the employer will fall on a refund position when filing
his/her individual tax return for the said year.

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Mortgage interest deduction
Interest paid on an amount borrowed from specified financial
institutions to finance either the purchase or improvement of premises
occupied for residential purposes is deductible against employment
income, up to a maximum of kshs. 300,000/- per annum. Failure to
deduct this will automatically lead to a refund.

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Monthly tax relief
When a resident individual is not granted personal relief by the
employer during the year, he or she will be entitled to a refund at the
end of the same year.
This relief is meant to lightens the tax burden on the taxpayer.
The current monthly tax relief is Ksh. 2,400 .

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Documents required for processing tax refunds
Tax deduction card (Form P.9) for claims relating to excess PAYE
deductions
Insurance policy certificates for claims relating to insurance relief
Mortgage certificate from a financial institution for claims relating
to interest on mortgage
Withholding tax certificates for claims relating to tax deducted at
source.

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The end