Meaning of ‘Negative Tax Due’ in KRA

If you’re filing your taxes with the Kenya Revenue Authority (KRA) and encounter the term ‘negative tax due,’ you might feel a bit confused. Don’t worry, we’re here to help. In this guide, we’ll demystify what ‘negative tax due’ means in the context of KRA and explore the implications it can have on your tax return.

Understanding ‘Negative Tax Due’

The first thing to understand is what we mean by ‘negative tax due.’ It’s a phrase you’ll encounter in your iTax returns dashboard when the calculated tax liability is less than the taxes already paid during the tax year. This could result from overpayment of taxes or tax deductions and credits that exceed your tax liability.

How Does Negative Tax Due Occur?

Before we dive into the specifics, let’s set the stage by briefly discussing how income tax works. Income tax is calculated based on your total taxable income for a given financial year. Depending on your employment status, you might make these tax payments in various ways.

For Employees

If you’re an employee, your employer deducts your tax dues from your salary every month – this is the Pay As You Earn (PAYE) system. At the end of the year, the total tax your employer has deducted should ideally be equal to your total tax liability for that year. However, sometimes, due to various circumstances such as miscalculations, changes in tax laws, or excess deductions, the total PAYE deductions might exceed your actual tax liability. This results in ‘negative tax due’.

For Self-Employed Individuals and Businesses

If you’re self-employed or run a business, you usually pay taxes through instalment taxes or presumptive taxes. At the end of the year, when you prepare your tax return, you calculate your tax liability based on your income. If your advance tax payments exceed this liability, it will result in ‘negative tax due’.

What Happens When You Have Negative Tax Due?

When you have ‘negative tax due’, it means you have overpaid your taxes and are entitled to a refund from KRA. This isn’t an automatic process, though – you must apply for a tax refund via the iTax portal.

Applying for a Tax Refund

We’ve detailed the process of applying for a tax refund in a previous section. But in brief, you need to log into your iTax account, navigate to the ‘Returns’ menu, select ‘Apply for Refund’, and fill out the necessary form. You’ll also need to attach supporting documents to validate your claim.

Can Negative Tax Due Be Carried Forward?

Yes, if you have a ‘negative tax due’, you also have the option to carry forward the excess tax paid to the next financial year instead of applying for a refund. This excess payment will be offset against your tax liability for the coming year.

Is Negative Tax Due a Cause for Concern?

Not at all! Having a ‘negative tax due’ simply means you’ve overpaid your taxes for that financial year. While no one wants to pay more tax than they owe, it’s not a critical issue. It doesn’t mean you’ve made a mistake, and it certainly isn’t a legal problem. You’re entitled to claim this overpayment back from KRA or carry it forward to the next tax year.

Ensuring Accuracy in Your Tax Payments

Having the right balance in your tax payments helps in maintaining a healthy cash flow, avoiding tying up your funds in overpayments. Regular reviews of your tax status, understanding tax laws and changes, and accurate calculation of taxes due can help prevent overpayment.

Regularly Check Your PAYE Deductions

If you’re an employee, ensure to regularly check your payslip to confirm that your employer is deducting the correct amount of tax. If you notice any discrepancies, raise it with your HR or payroll department for rectification.

Review Your Installment Tax Payments

For self-employed individuals and businesses, keep an eye on your instalment tax payments. Regularly reviewing these payments and comparing them with your projected annual income can help you avoid overpayment.

Consider Professional Assistance

When it comes to taxes, a little professional help can go a long way. Tax laws can be complex and often change over time. Hiring a tax professional or a tax attorney to handle your taxes can help ensure accuracy, compliance, and prevent instances of overpayment leading to ‘negative tax due’.

Conclusion

In conclusion, encountering a ‘negative tax due’ on your KRA iTax return is not a cause for alarm. It simply means you’ve overpaid your taxes for the financial year. Whether you decide to apply for a tax refund or carry forward the excess payment to the next financial year, the important thing is to understand what it means and the options available to you. With this guide, we hope we’ve clarified the concept and made your tax journey a bit smoother. Happy tax filing!



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