National Hospital Insurance Fund (NHIF) contributors are among Kenyans who qualify for tax reliefs offered by the government.
In a statement released on Friday, February 10, tax authorities asked Kenyans contributing to NHIF to review their relief options and apply for reimbursement.
"The Finance Act 2021 amended Section 31 of the Income Tax Act to allow contributions to NHIF to qualify for Insurance Relief effective January 1, 2023," read the statement.
Income Tax Act (cap 470), Sections 30 and 31 allow for personal relief at the rate determined under the third schedule, to benefit various contributors such as those paying for insurance coverage, including the NHIF.
"Personal and insurance reliefs form part of tax reliefs in Kenya. These incentives reduce the amount of tax one has to pay and are granted on a monthly basis," the tax authority stated in a statement.
At the same time, the Insurance Regulatory Authority explained that only employees who are subject to PAYE tax can claim the 15 per cent Insurance Premium Tax Relief on their NHIF contribution.
"The tax-paying life policyholder should obtain an annual insurance premium contribution certificate from the insurer and submit a copy of the same to the employer.
"The certificate should be accompanied with a letter from the policyholder seeking for the relief. The employer is expected to effect the relief through the payroll by submitting the premium to the insurer net of the 15% relief," Insurance Regulatory Authority explained.
Self-employed individuals should request for 15 per cent Insurance Premium Relief that is made through the annual tax returns by submitting the annual premium contribution certificate to the authority who will then compute the refund.
The government uses relief insurance relief on premiums to take care of important national projects such as education policies, health policies or life insurance for resident individuals.
Section 31 of the Income Tax Act stipulates that the compensations must be remitted in cash to the policyholder.
"It acts as a credit against a tax liability. Every resident is entitled to a personal relief of Ksh16,896 per annum (Kshs1,408 per month) effective January 1, 2018.
"For example, if you computed your taxes for a particular month and the tax due amounts to Ksh5000, you will enjoy a tax relief of Ksh1408. After deducting the tax relief, you will end up with a less tax burden of Ksh3592," the government explained.
"Every resident individual is entitled to an insurance relief of 15 per cent of the amount of premiums paid for self, spouse or child, subject to a maximum of Ksh60,000 per annum. The education policy must have a maturity period of at least 10 years," the Government explained in a statement.
How to Apply for NHIF Relief
Taxpayers filing the Income Tax Resident (ITR) Returns for 2022 are guided as follows:
1. Upon filing returns, the user should select 'Yes' to the question, "Do you have an Income Insurance Policy?"
2. Proceed to capture NHIF details under the iTax "Insurance Relief" sheet.
3. Slot in NHIF PIN and card number and define the type of policy as health.
You can also send the word NHIF as SMS designated to retrieve your PIN and card number.
Users should indicate that their designation is a self-policy before defining the return periods, which should run from the beginning to the end of the year.
