MONTHLY RENTAL INCOME TAX. | Ronalds LLP

Monthly Rental Income (MRI) which is also referred to as residential income refers to income derived from renting out residential properties for use or occupation. It is charged under section 6A of Income Tax Act; it was introduced by the Finance Act 2015. 

In 2021 there were changes to the Rental income Tax due to changes in legislation. The Finance Act 2020 broadened the scope of those liable to pay monthly rental income from Kshs. 144,000 to Kshs. 288,000 for minimum threshold, similarly the maximum threshold was capped from 10 Million to 15 Million. It is important to note that landlords whose rental income is below Kshs. 288,000 per year are exempt from monthly rental income.

Tax Rate.

The Monthly rental income is charged at a rate 10% on gross rent received per month.

Exemption.

There are however a group of taxpayers exempted. The tax does not apply to:

  1. Non-residents.

  2. Landlords earning more than Kshs.15M per annum.

  3. Taxpayers who wish to remain in the current tax regime on rental income may elect to do so by writing to the Commissioner.

PENALTY FOR LATE FILING AND LATE PAYMENT OF MONTHLY INCOME RENT.

The Monthly rental income is supposed to be filed and paid on or before 20th of the following month. Failure to do so on time  leads to a Penalty on late filing. The penalties are penalties are charged as per the shown schedule below:

  1. 2,000 or 5% of the tax due whichever is higher for individuals.

  2. 20,000 or 5% of the tax due whichever is higher for corporates.

Penalty on late payment:

  1. 5% of tax due

  2. Late payment interest of 1% per month on the unpaid tax until the tax is paid in full.

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