October 6, 2025
Maina Susan is a Tax & Finance Writer at Quartet Solutions, simplifying tax regulations and financial concepts to help businesses stay compliant.
LinkedIn >>Paying taxes in Kenya doesn’t have to feel like climbing Mount Kenya barefoot.
Whether you run a small business, a farm, or earn income outside your salary, understanding installment tax in Kenya is key to staying compliant, avoiding penalties, and managing your cash flow.
This simple guide by Quartet Consulting walks you through the process in simple terms, with practical examples, so you know exactly what to do and when.
Table of Contents:
Think of installment tax in Kenya as paying your income or corporate tax in smaller, manageable chunks throughout the year, rather than one large lump sum at year-end.
The Kenya Revenue Authority (KRA) introduced this system to make tax compliance easier for businesses and individuals, while ensuring the government receives a steady flow of revenue.
For companies, installment tax usually refers to corporate tax in Kenya paid in four equal installments.
Individuals with taxable income outside PAYE may also be required to pay.
Installment tax in Kenya is regulated under the Income Tax Act (Cap 470) and managed through KRA’s iTax platform, which makes it easier to register, file, and pay your taxes online.
Why this matters to you:
Stay compliant and avoid KRA Penalties
Book Your Free Consultation with Quartet Consulting TodayHere’s the difference in simple terms:
Paying your installment tax on time helps you avoid penalties and keeps your cash flow under control.
If you’re running a company in Kenya, it’s important to know the tax rates:
Knowing your company’s tax rate helps you estimate your installment tax correctly and plan your payments on iTax without surprises.
You are required to pay installment tax in Kenya if:
Exemptions Include:
(Read more on Turnover Tax on our simple guide)
Special Case: Agricultural businesses follow a slightly different installment tax schedule in Kenya due to seasonal income.
We’ll help you determine your tax obligations and plan your payments efficiently.
Book Your Free Consultation with Quartet Consulting TodayThere are two ways KRA expects you to estimate your installment tax:
| Installment Tax Calculation in Kenya | Description | Example |
|---|---|---|
|
Prior Year Basis
|
– Multiply last year’s tax by 110%.
– This works well for established businesses with predictable income. |
– Last year, your business paid KES 300,000 in income tax. – Your 2025 installment tax estimate = 300,000 × 110% = KES 330,000 – split into four equal payments of KES 82,500. |
|
Current Year Basis
|
– Estimate your profit for the current year and apply the relevant tax rate. – This is ideal for new businesses or businesses coming out of losses. |
– You start a new consultancy and expect a taxable profit of KES 200,000. – Your 2025 tax will be based on that estimate and divided into four equal installments. |
Installment Tax in Kenya Calculation Formula
Formula:
Installment Tax per Quarter = (Estimated Tax × Tax Rate) ÷ 4
Calculation of Installment Tax in Kenya Example – Busitani Holdings:
Busitani Holdings, a real estate company, has an estimated corporate tax of KES 5,000,000 for 2025.
Their Tax Year runs from 1st January – 31st December.
Their Installment Tax Payment schedule will be as follows:
| Installment | Month | Amount |
|---|---|---|
|
1st
|
April 2025 |
25% = KES 1,250,000
|
|
2nd
|
June 2025 |
25% = KES 1,250,000
|
|
3rd
|
September 2025
|
25% = KES 1,250,000
|
|
4th
|
December 2025
|
25% = KES 1,250,000
|
Note:
Let us handle the calculations and guide you through KRA’s iTax system while you focus on your business.
Book Your Free Consultation with Quartet Consulting TodayFor most taxpayers (except agricultural businesses), their schedule is as follows:
| Installment | Due Date | Percentage of Total Tax |
|---|---|---|
|
1st
|
20th of 4th month
|
25%
|
|
2nd
|
20th of 6th month
|
25%
|
|
3rd
|
20th of 9th month
|
25%
|
|
4th
|
20th of 12th month
|
25%
|
Note: This schedule applies to most companies and individuals who are required to pay installment tax in Kenya.
Agricultural Sector:
| Installment | Due Date | Percentage of Total Tax |
|---|---|---|
|
1st
|
20th of 9th month
|
75%
|
|
2nd
|
20th of 12th month
|
25%
|
Note: Agricultural businesses follow a different schedule due to seasonal income cycles.
Whether you’re applying because your turnover has passed the Ksh 5 million threshold or you’re opting for voluntary VAT registration in Kenya, the process is largely the same.
| Step | Action | Details / Tips |
|---|---|---|
|
1
|
Log in to iTax
|
Visit iTax portal and log in using your KRA PIN and password. Register if you don’t have an account.
|
|
2
|
Select the Correct Form
|
Go to “Returns” → “File Return” → “Income Tax – Company Return (IT2C)” for companies, or the relevant income tax form for individuals.
|
|
3
|
Estimate Annual Tax
|
Choose between Prior Year Basis (last year’s tax × 110%) or Current Year Basis (estimate this year’s profits × tax rate).
|
|
4
|
Generate Payment Slip
|
iTax will produce a slip for paying your installment tax. Save or print it.
|
|
5 |
Pay the Tax
|
Pay at any KRA-approved bank or via iTax online payment.
|
|
6 |
Adjust if Necessary
|
Revise your installment tax if income changes, but ensure at least 80% of total tax liability is met to avoid penalties.
|
|
7 |
Use Accounting Software (Optional)
|
Tools like QuickBooks or Xero help track income and automatically calculate installment tax.
|
| Type of Penalty | What It Means |
|---|---|
|
Late Payment
|
5% of the unpaid tax plus 1% interest per month until payment is made.
|
|
Underpayment
|
If you pay less than 80% of your total tax liability, KRA charges 20% of the shortfall.
|
|
Late Filing |
KES 10,000 or 5% of the tax due, whichever is higher.
|
While installment tax is designed to simplify tax payments, taxpayers often face challenges.
| Challenge | What It Means | Solution/ Tip |
|---|---|---|
|
Inaccurate Income Projections
|
Overestimating or underestimating taxable income can lead to overpayment or underpayment, triggering penalties.
|
Work with a tax consultant like Quartet Consulting to create realistic financial projections based on historical data and market trends.
|
|
Cash Flow Constraints
|
Businesses with irregular cash flows may struggle to meet quarterly deadlines.
|
Implement robust cash flow forecasting and maintain a reserve fund for tax payments.
|
|
Complex Calculations
|
Calculating installment tax can be daunting, especially for businesses with multiple income streams.
|
Use accounting software or consult a tax professional to streamline calculations and ensure accuracy.
|
|
Missed Deadlines
|
Forgetting or delaying payments can result in penalties.
|
Set calendar reminders and automate payments through the iTax platform.
|
Avoid costly mistakes with expert guidance and proactive planning.
Book Your Free Consultation with Quartet Consulting Today| Tip | How It Helps You |
|---|---|
|
Leverage Professional Advice
|
Working with a tax consultant or law firm ensures accurate calculations and compliance with KRA regulations.
|
|
Use Technology
|
Accounting software like QuickBooks or Xero helps you track income, calculate taxes, and stay organized.
|
|
Monitor Legislative Changes
|
Staying updated on laws like the Finance Act 2023 or Tax Laws (Amendment) Act 2024 ensures your tax planning reflects the latest requirements.
|
|
Maintain Records
|
Keeping detailed financial records supports your income projections and makes filing accurate installment tax returns easier.
|
|
Plan for Contingencies
|
Setting aside a buffer fund helps cover unexpected tax liabilities or penalties, reducing stress and financial risk.
|
Kenya’s tax rules are always evolving, and it’s important to stay up to date so you can plan your installment tax correctly. Here are some recent updates:
We’ll keep you updated, ensure your installment tax estimates are accurate, and help you meet all KRA requirements.
Book Your Free Consultation with Quartet Consulting TodayQ: Can I pay my tax in installments to KRA?
Yes! Installment tax is designed so you can pay your income tax in smaller chunks throughout the year instead of one big lump sum.
Q: What happens if I don’t pay the full tax amount?
If you underpay, KRA can charge penalties and interest. They may also hold back your compliance certificates, which could affect business operations.
Q:Can I pay all my tax at once instead of in four installments?
Absolutely. You can pay your full annual tax in one lump sum if that works better for your cash flow.
Q:What if my business made a loss this year?
No worries. Installment tax in Kenya is based on estimated profits. If you expect a loss, your installments can be adjusted accordingly.Consult a tax professional for more information.
Q: Is corporate tax the same as installment tax in Kenya?
Not quite. Corporate tax is the total tax your company owes for the year, while installment tax is just the advance payments you make toward that total.
Q: Can I adjust my installment tax payments if my income changes?
Yes, you can revise your estimated taxable income and adjust payments accordingly. However, ensure the total paid is at least 80% of the actual tax liability to avoid penalties.
Q: Can installment tax be offset against other KRA tax refunds?
Yes. Any tax or duty payable to KRA (except VAT and import duties) can be offset against confirmed refunds, as long as you request it at least 30 days before the due date.
Installment tax in Kenya is designed to make paying income tax easier by breaking it into manageable chunks.
By understanding your obligations, calculating your payments correctly, and filing on time through the KRA iTax platform, you can avoid penalties, manage your cash flow, and stay fully compliant.
Whether you’re running a real estate company like Busitani Holdings, a farm, or a small business, planning your installment tax payments is crucial for smooth business operations and financial stability.
Whether you’re filing for the first time, adjusting estimates, or managing penalties, we’ll help you stay compliant, avoid surprises, and optimize your cash flow.
Book Your Free Consultation with Quartet Consulting TodayAt Quartet Consulting, we help businesses and individuals navigate Kenya’s tax system with confidence.
Our team can guide you through installment tax, corporate tax, and other tax obligations.
Book your free first consultation today and ensure your tax planning is accurate, stress-free, and fully compliant.
This guide is for informational purposes only and should not be considered professional tax advice. Tax laws in Kenya are subject to change, and you should consult a qualified tax professional or law firm, such as Quartet Consulting, for advice specific to your situation.
Understanding Installment Tax in Kenya: An Exhaustive Guide
Taxation for Companies & Partnerships / – Filing & Paying Taxes.
Taxation for Companies & Partnerships / – Filing & Paying Taxes.
The Income Tax Act (CAP 470); Revised Edition, 2021 – Nairobi
The-Finance-Act–2023.pdf – Nairobi
https://kenyalaw.org/kl/fileadmin/pdfdownloads/Acts/2024/TheTaxLaws_Amendment_Act_No.12of2024.pdf
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