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Tax Question...
Kusadikika
#1 Posted : Thursday, February 20, 2014 4:46:37 AM
Rank: Elder


Joined: 7/22/2008
Posts: 2,695
A woman has a garden on which she grows mboga and rears cows. From the milk and mboga proceeds she nets about Ksh. 10,000 per month. She also has some rental houses that bring in another Ksh. 15,000. She has 5 grown children who each give her Ksh. 5,000 every month. All for a total of Ksh. 50,000 per month.

Question:

According to KRA (For taxation purposes) what is her income? Are all monies received considered income?

Naomba kufunzwa.
Bigchick
#2 Posted : Thursday, February 20, 2014 7:32:49 AM
Rank: Elder


Joined: 2/8/2013
Posts: 4,068
Location: At Large.
All looked at seperately fall below the tax bracket so hakuna malipo.

Love is beautiful and so are those who share it.With Love, Marriage is an amazing event in ones life time, the foundation of joy, happiness and success.
mkenyan
#3 Posted : Thursday, February 20, 2014 8:05:03 AM
Rank: Veteran


Joined: 4/1/2009
Posts: 1,882
Bigchick wrote:
All looked at seperately fall below the tax bracket so hakuna malipo.


am no tax expert but that doesn't sound right.
gregory
#4 Posted : Thursday, February 20, 2014 8:11:16 AM
Rank: Member


Joined: 12/2/2011
Posts: 176
Kusadikika wrote:
A woman has a garden on which she grows mboga and rears cows. From the milk and mboga proceeds she nets about Ksh. 10,000 per month. She also has some rental houses that bring in another Ksh. 15,000. She has 5 grown children who each give her Ksh. 5,000 every month. All for a total of Ksh. 50,000 per month.

Question:

According to KRA (For taxation purposes) what is her income? Are all monies received considered income?

Naomba kufunzwa.


am not sure whether the rental income is within the tax bracket but am sure she should not be taxed from the money she receives from her children. she has not "earned" it
Angelica _ann
#5 Posted : Thursday, February 20, 2014 8:12:01 AM
Rank: Elder


Joined: 12/7/2012
Posts: 11,901
mkenyan wrote:
Bigchick wrote:
All looked at seperately fall below the tax bracket so hakuna malipo.


am no tax expert but that doesn't sound right.

KRA got some work to do: 1st 2 are taxable i.e. 25k though amout can be reduced!
In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
Swenani
#6 Posted : Thursday, February 20, 2014 8:24:59 AM
Rank: User


Joined: 8/15/2013
Posts: 13,236
Location: Vacuum
Kusadikika wrote:
A woman has a garden on which she grows mboga and rears cows. From the milk and mboga proceeds she nets about Ksh. 10,000 per month. She also has some rental houses that bring in another Ksh. 15,000. She has 5 grown children who each give her Ksh. 5,000 every month. All for a total of Ksh. 50,000 per month.

Question:

According to KRA (For taxation purposes) what is her income? Are all monies received considered income?

Naomba kufunzwa.


Taxable income
Agricultural income 10K(assuming she has deducted all the expenses including capital and farm house allowances)
Rental Income-15K(again assuming she has deducted interest and other running expenses)
Total Taxable income is Kshs.25K

You cannot tax the money given by her children since it has already been taxed
If Obiero did it, Who Am I?
ZZE123
#7 Posted : Thursday, February 20, 2014 8:26:48 AM
Rank: Elder


Joined: 6/21/2008
Posts: 2,490
Angelica _ann wrote:
mkenyan wrote:
Bigchick wrote:
All looked at seperately fall below the tax bracket so hakuna malipo.


am no tax expert but that doesn't sound right.

KRA got some work to do: 1st 2 are taxable i.e. 25k though amout can be reduced!

Farming income is taxable. Rental income is looked at separately hence taxable at 30% but one can reduce using expenses associated with the house. Money from the kids not taxable.
The man who marries a beautiful woman, and the farmer who grows corn by the roadside have the same problem
mukiha
#8 Posted : Thursday, February 20, 2014 8:39:19 AM
Rank: Elder


Joined: 6/27/2008
Posts: 4,114
Bigchick wrote:
All looked at seperately fall below the tax bracket so hakuna malipo.



That's not the correct way to look at it!

Look at this Tax Returns Form: http://www.kra.go.ke/notices/pdf2013/IT12012.pdf

Go to pg3 and look at line 35 in PART H. It requires that ALL the income categories are added together and then the tax due calculated on the TOTAL income.

In my view, the taxable income is that which comes from her work. Gifts from her children, however high cannot qualify for taxation.

Thus the tax should be calculated only on the 25k from the farming and rental houses....assuming that the figures given here are the net profits, not the turn-over (sales)
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
Tebes
#9 Posted : Thursday, February 20, 2014 9:12:24 AM
Rank: Elder


Joined: 11/26/2008
Posts: 2,097
Taxable income is the sum of rental and farming income, less personal relief.
"Never regret, if its good, its wonderful. If its bad, its experience."
Angelica _ann
#10 Posted : Thursday, February 20, 2014 9:24:51 AM
Rank: Elder


Joined: 12/7/2012
Posts: 11,901
@Bigchick is part of #teamtaxevasion# d'oh!
In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
butterflyke
#11 Posted : Thursday, February 20, 2014 9:38:37 AM
Rank: Elder


Joined: 5/1/2010
Posts: 3,024
Location: Hapa
Swenani wrote:
Kusadikika wrote:
A woman has a garden on which she grows mboga and rears cows. From the milk and mboga proceeds she nets about Ksh. 10,000 per month. She also has some rental houses that bring in another Ksh. 15,000. She has 5 grown children who each give her Ksh. 5,000 every month. All for a total of Ksh. 50,000 per month.

Question:

According to KRA (For taxation purposes) what is her income? Are all monies received considered income?

Naomba kufunzwa.


Taxable income
Agricultural income 10K(assuming she has deducted all the expenses including capital and farm house allowances)
Rental Income-15K(again assuming she has deducted interest and other running expenses)
Total Taxable income is Kshs.25K

You cannot tax the money given by her children since it has already been taxed


Salaries are taxed and the same money still gets taxed at the bank, at the supermarket, kwa petrol station, etc.....no?
Float like a butterfly, sting like a bee. - Muhammad Ali🐝
Swenani
#12 Posted : Thursday, February 20, 2014 9:42:02 AM
Rank: User


Joined: 8/15/2013
Posts: 13,236
Location: Vacuum
butterflyke wrote:
Swenani wrote:
Kusadikika wrote:
A woman has a garden on which she grows mboga and rears cows. From the milk and mboga proceeds she nets about Ksh. 10,000 per month. She also has some rental houses that bring in another Ksh. 15,000. She has 5 grown children who each give her Ksh. 5,000 every month. All for a total of Ksh. 50,000 per month.

Question:

According to KRA (For taxation purposes) what is her income? Are all monies received considered income?

Naomba kufunzwa.


Taxable income
Agricultural income 10K(assuming she has deducted all the expenses including capital and farm house allowances)
Rental Income-15K(again assuming she has deducted interest and other running expenses)
Total Taxable income is Kshs.25K

You cannot tax the money given by her children since it has already been taxed


Salaries are taxed and the same money still gets taxed at the bank, at the supermarket, kwa petrol station, etc.....no?


Income is only taxed when you earn it or when you spend it.Since the income is not earned from her children she will be taxed when she spends teh cash i.e through VAT etc
If Obiero did it, Who Am I?
butterflyke
#13 Posted : Thursday, February 20, 2014 9:46:46 AM
Rank: Elder


Joined: 5/1/2010
Posts: 3,024
Location: Hapa
Swenani wrote:
butterflyke wrote:
Swenani wrote:
Kusadikika wrote:
A woman has a garden on which she grows mboga and rears cows. From the milk and mboga proceeds she nets about Ksh. 10,000 per month. She also has some rental houses that bring in another Ksh. 15,000. She has 5 grown children who each give her Ksh. 5,000 every month. All for a total of Ksh. 50,000 per month.

Question:

According to KRA (For taxation purposes) what is her income? Are all monies received considered income?

Naomba kufunzwa.


Taxable income
Agricultural income 10K(assuming she has deducted all the expenses including capital and farm house allowances)
Rental Income-15K(again assuming she has deducted interest and other running expenses)
Total Taxable income is Kshs.25K

You cannot tax the money given by her children since it has already been taxed


Salaries are taxed and the same money still gets taxed at the bank, at the supermarket, kwa petrol station, etc.....no?


Income is only taxed when you earn it or when you spend it.Since the income is not earned from her children she will be taxed when she spends teh cash i.e through VAT etc


i do not think she should be taxed for the gifts from her children

as you've mentioned, income is taxed when you earn it or spend it - my point is for mapatos, income is taxed when we earn AND when we spend it
smile
Float like a butterfly, sting like a bee. - Muhammad Ali🐝
Much Know
#14 Posted : Thursday, February 20, 2014 10:21:47 AM
Rank: Elder


Joined: 12/6/2008
Posts: 3,548
You will have to read too many books. But her Age, Dependents, Agricultural policy e.t.c should enable her get some reprieve if our tax system is fair, the best thing for KRA would be to simply create a special category for "self employed" who earn below certain amount and charge a percentage of the TOTAL gross, such as they charge a percentage to commission sales people, and gamblers e.t.c, rather than get into complicated arithmetic of cows here, then subsidy here, tax returns there e.t.c. I think i saw something similar in the tax returns.
A New Kenya
mukiha
#15 Posted : Thursday, February 20, 2014 10:57:24 AM
Rank: Elder


Joined: 6/27/2008
Posts: 4,114
Much Know wrote:
You will have to read too many books. But her Age, Dependents, Agricultural policy e.t.c should enable her get some reprieve if our tax system is fair, the best thing for KRA would be to simply create a special category for "self employed" who earn below certain amount and charge a percentage of the TOTAL gross, such as they charge a percentage to commission sales people, and gamblers e.t.c, rather than get into complicated arithmetic of cows here, then subsidy here, tax returns there e.t.c. I think i saw something similar in the tax returns.


This already exists; it's called Turn-Over Tax [TOT]. It takes 3% of turn-over as the final tax.

But the lady in question here cannot enlist for TOT because it excludes those who have rental income.
Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
Gathige
#16 Posted : Thursday, February 20, 2014 12:03:25 PM
Rank: Elder


Joined: 3/29/2011
Posts: 2,242
@Kusadikika, The rule of thumb in tax matters is all income is taxable unless exempt or below the threshold limits. The tax man knows the administrative challenges of collecting the tax from mama mbogas and most of the times such pple escape the noose.

In your case, all the money is taxable ( even the income from her grown up children as money changes character when it changes hands.)

"Things that matter most must never be at the mercy of things that matter least." Goethe
jawgey
#17 Posted : Thursday, February 20, 2014 12:41:30 PM
Rank: Member


Joined: 1/13/2014
Posts: 376
Location: Denmark
ZZE123 wrote:
Angelica _ann wrote:
mkenyan wrote:
Bigchick wrote:
All looked at seperately fall below the tax bracket so hakuna malipo.


am no tax expert but that doesn't sound right.

KRA got some work to do: 1st 2 are taxable i.e. 25k though amout can be reduced!

Farming income is taxable. Rental income is looked at separately hence taxable at 30% but one can reduce using expenses associated with the house. Money from the kids not taxable.


Rental income to a resident individual is not taxed at 30%.. Its subjected to the graduated scale as employment income.
Therefore the taxable income will be rental income plus farming income(25k) will be subjected to the graduated scale and taxed against the resident individual rates i.e. up to 20% bracket.

Seeing is believing
jawgey
#18 Posted : Thursday, February 20, 2014 12:47:08 PM
Rank: Member


Joined: 1/13/2014
Posts: 376
Location: Denmark
jawgey wrote:
ZZE123 wrote:
Angelica _ann wrote:
mkenyan wrote:
Bigchick wrote:
All looked at seperately fall below the tax bracket so hakuna malipo.


am no tax expert but that doesn't sound right.

KRA got some work to do: 1st 2 are taxable i.e. 25k though amout can be reduced!

Farming income is taxable. Rental income is looked at separately hence taxable at 30% but one can reduce using expenses associated with the house. Money from the kids not taxable.


Rental income to a resident individual is not taxed at 30%.. Its subjected to the graduated scale as employment income.
Therefore the taxable income will be rental income plus farming income(25k) will be subjected to the graduated scale and taxed against the resident individual rates i.e. up to 20% bracket. Incase you need need advice on how to reduce the tax liability hit my inbox @njugialex@gmail.com, I am a tax consultant I can help you/her with that. smile


Seeing is believing
Swenani
#19 Posted : Thursday, February 20, 2014 1:04:45 PM
Rank: User


Joined: 8/15/2013
Posts: 13,236
Location: Vacuum
Gathige wrote:
@Kusadikika, The rule of thumb in tax matters is all income is taxable unless exempt or below the threshold limits. The tax man knows the administrative challenges of collecting the tax from mama mbogas and most of the times such pple escape the noose.

In your case, all the money is taxable ( even the income from her grown up children as money changes character when it changes hands.)




Shame on you Shame on you Shame on you Shame on you Shame on you Shame on you Wewe stop lying.

Income tax is only imposed on
Business income
Employment income and benefits
Rental income
Pension and
Investment income
If Obiero did it, Who Am I?
jguru
#20 Posted : Thursday, February 20, 2014 1:17:11 PM
Rank: Veteran


Joined: 10/25/2007
Posts: 1,574
he he he

Interesting that Accountants, Auditors and Tax Consultants cannot agree on how much a lady with an income of KES50,000 should pay. Imagine the chaos when the income is 50 Million!

No wonder big companies like Nakumatt do not pay tax... smile
Set out to correct the world's wrongs and you will most certainly wind up adding to them.
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