Your IT Returns are a statement of your earnings, expenditures, profits, and losses for a financial year. Filing tax returns even if your income falls below the taxable slab can help you create a clear record of income earned and other details. In case, in later years your income increases to the taxable level, you can claim some benefits on taxes if you have been filing IT returns regularly.
What Constitutes Your Income?
Your income is not just your salary or the earnings from your business. There are other heads of income for income tax purposes, so be sure to include them all while filing your tax return. These include interests on bank deposits, rental income from house property, and even capital gains from the sale of land or shares, grants or donations. Declare all incomes whether taxable, zero or Exempt.
Why you need to be on time.
You need to file your IT returns before the deadline (June 31) for a particular financial year, in order to avoid problems related to late filing. Even if you file the return one day after the final date, it is a belated return, and you might lose out on certain benefits. Here are some of the problems you may face:
Revision of returns becomes difficult/questionable. If you have overshot the deadline for filing your tax returns, you cannot correct mistakes that you might have made. If you have submitted the tax returns on time, there are no limits to the corrections you can make—whether it’s some calculation errors or you’ve provided incorrect bank details or any other wrong information.
Penalties and interest on taxes due
If you have pending tax payments when you file your returns and you are late with your filing, you will incur interest charges. You will be levied an interest of 1% per month on the total taxes due. Besides this, if you don’t file the returns even by the end of the assessment year, you may face prosecution by the authorities.
Even if there are no tax dues, if you fail to file your tax returns by the end of the assessment year, that is one year after the relevant financial year, you can be charged a penalty at the rate of 20% on most of the obligations by KRA.all this put you at the mercy of the Taxman(KRA) always.
Refunds – Delays and losses
If you are late with your IT returns submission, any refunds you’re eligible for, on the excess tax payments you might have made through the domestic taxes department (DTD) and self-assessment taxes, might get delayed. Even more important, you will also lose a certain portion of the interest paid on the refunds.
As long as you have a KRA pin then you WILL be fined.
I’m convinced that many people consider tax returns as a duty for employed citizens and business persons/organizations but as a KRA authorized agent I want to remind Kenyans that *‘AS LONG AS you have a KRA PIN Number’, you are obligated to file a return.* so please, do not forget or skip filing your returns this year, even if it’s NIL. And let the person next to you know that as well.
An astute Accountant or lawyer will tell you that this is important if you don’t want to pay extra amounts as fines with interest on your tax or avoid future litigations.
The fine for not filing your annual tax returns has increased from Sh1, 000 up to Sh20, 000.
The deadline as set by Kenya Revenue Authority (KRA) is 30th June for every taxpayer to have filed their returns.
No one is exempted as long as they have a KRA pin certificate.
See some of the offences and penalties for yourself.
Offences & Penalties
Tax offences can attract punitive penalties and interest. These include:
Offence- Failure to deduct PAYE, account for it or to submit a certificate upon request.
Penalty-Whichever is greater than, 25% of the amount of the tax involved or Ksh. 10,000.
Offence – Failure to deduct or remit Withholding Tax.
Penalty – 10% of the amount of the tax involved, up to a maximum of Kshs. 1 million.
Offence – failure to remit Excise Duty or VAT.
Penalty – whichever is greater than, 5% of the amount of the tax due or Ksh. 10,000?
Offence – Failure to pay tax on the due date.
Penalty – 20% of the tax involved is charged.
Offence – Failure to file annual returns by the due date.
Penalty – Additional tax equal to 5% of the normal tax, or Ksh. 10,000 in for Non-Individual Taxpayers.
In Conclusion, Tax filing is an important duty as it provides the government with a record of the earnings and expenditures of its citizens. It is also valid income proof, required by banks for loans, by foreign governments for granting visas and for other purposes as an actual & additional document. Please also note that it can be used as evidence in litigation cases so, make sure to file the returns on time always.
*KRA- Kenya Revenue Authority (KRA), is an agency of the Government of Kenya that is responsible for the assessment, collection and accounting for all revenues that are due to the government, in accordance with the laws of Kenya.
For further information, help, or inquiry, consult.
Guru Accounting & Tax Consultancy