How to compute the Rental Income Tax

Most people usually have trouble calculating the amount of tax that they are supposed to pay. This is mostly due to the perception that taxes are a complicated affair that should only be handled by accountants. However, the Rental Income Tax has been simplified to make it easier to calculate and remit as this post will portray. The first step in computing the tax is to prepare a rent schedule for all to let property showing the number of the property, rent received per property and gross rent received. The next step is to complete a monthly tax return online via iTax by declaring the gross rent and tax payable will be computed automatically at 10%. It is important to note that property owners shall not deduct any expenses incurred.

In this post, we will dwell on how one can go about computing the tax a landlord is expected to pay under the new regime. Have a look at the worked out example below;

Mbugua (not from the Faiba ad) has two residential properties from which he earns rental income. Property A in Rongai has 10 units and Kshs.20,000 per month per unit while property B in Kinoo also has 10 units at Kshs.15,000 per month per unit. For this exercise we will operate under the assumption that all Mbugua’s units were occupied for the month of January 2016.

  1. Gross rental income for the month of January

Property A – 10 units * Kshs.20,000 = 200,000

Property B – 5 units * Kshs.15,000 = 150,000

Total rental income                         = 350,000


  1. Computation of Mbugua’s tax for the month (on the assumption that he does not have any other incomes):

Taxable monthly gross rental income – Kshs. 350,000

Tax is at 10% (350,000*10%)     – Kshs. 35,000

The amount of Kshs. 35,000 is payable on or before the 20th of the following month which in this case is on the 20th day of February 2016. I have to say this is the easiest tax to compute and literally eliminates the need to have an accountant to calculate your taxes thus making it cheaper to comply. As such landlords really do not have an excuse for not submitting their returns.