Sections of Kenyan employees were handed reprieve on Tuesday after the Kenya Revenue Authority (KRA) announced tax exemptions on gratuity payments earned after July 1.
This change, introduced through the Finance Act, 2025, effectively means that employees will keep more of their end-of-service payments in a policy shift aimed at easing the burden on taxpayers, especially retirees and those leaving long-term jobs. "Gratuity payments earned after 1st July 2025 are now exempt from income tax.
This applies to both employees and employers," a statement from KRA read. Gratuity is a lump sum paid to employees by their employer when they retire or leave a job after years of service.
Previously, gratuity was treated as part of the employee's income and taxed accordingly.
