Before you start filing monthly rental income tax, you need to know the total gross income of your rental properties. Filing is done monthly on or before 20th of each month.
The monthly rental income tax is final. This means you will file a nil annual return unless one has other incomes such as commercial rent, employment income, business income, farm income among others.
Monthly Rental Income Tax (MRI)
- Charged under Section 6A of the Income Tax Act
- Introduced by Finance Act 2015
- Effective from 1st January 2016
What is Residential Monthly Rental Income Tax?
This is a tax payable by resident persons (individual or company) on rental income earned for the use or occupation of a residential property where the rent income is between Kshs. 144,000 (Kshs. 12,000 per month)and Kshs. 10 million per annum.
Note:
Landlords with rental income below Kshs. 144,000 or above Kshs. 10 million per year shall be required to file annual income tax returns and declare this rental income together with income from other sources.
What is the Tax Rate?
Residential rental income is charged at a flat rate of 10% on gross rent received per month. It is payable when landlords receive rent from their tenants either monthly, quarterly, semi-annually or annually. However, returns must be filed monthly.
No expenses, losses or capital deduction allowances are allowed from the gross rent.
How to File Monthly Rental Income Tax
- Log in to iTax Portal using your pin and password. Check this link if you need help to reset your itax password.
- Hover your mouse on Returns tab and once the drop-down menu opens, click on File Return.
- Select Income Tax Rental as the obligation type and click next.
- Select the tax period but if you have been filing, this field will be automatically filled. Otherwise if it the first time, select first of the month you wish to start filing. The type of return should be original unless you wish to amend a previous one. Click next to proceed.
- Input the total number of properties you have and total rental income.
- Tax due is calculated and displayed.
- Click on submit and click on the link for payment if you want to make payment. You can pay via electronic means or through any of the supported banks.
When to File Nil Rental Return
For any month that the landlord does not receive any rent, he/she shall file a NIL return. You can also file and pay your rental return using the new KRA M-service App.
Exemptions from MRI
The simplified tax does not apply to:
- Non-residents.
- Landlords earning more than Kshs. 10M per annum.
- Taxpayers who wish to remain in the current tax regime on rental income may elect to do so by writing to Commissioner.
Penalty for Late Filing and Paying of Monthly Rental Tax
Returns are filed and tax payable on or before the 20th of the following month. Penalty on late filing of MRI returns attracts a penalty of:
- 2,000 or 5% of the tax due whichever is higher for individuals
- 20,000 or 5% of the tax due whichever is higher for corporate
Penalty on Paying:
- 5% of the tax due and
- Late payment interest of 1% per month on the unpaid tax until the tax is paid in full.
- Default penalty of Kshs. 10,000 per month and Ksh. 2,000 per month for corporate and individuals respectively.
