The Finance Act, 2026 introduced an important tax relief on pension benefits.
Under the amendment to paragraph 53 of Part I of the First Schedule to the Income Tax Act, pension benefits paid upon the death of a pension member are exempt from tax.
What Does This Mean?
Where a pension member dies and their pension benefits become payable to their dependants or beneficiaries, those benefits will not be subject to tax.
Example:
If a deceased member has accumulated KES 5,000,000 in pension benefits and the amount becomes payable to their beneficiaries:
Pension benefits: KES 5,000,000
Tax on the death benefit: KES 0
Amount preserved for beneficiaries: KES 5,000,000
This provides relief to families by ensuring that pension savings accumulated by a deceased member are not reduced by tax when paid out as death benefits.
It also supports the objective of preserving retirement savings for beneficiaries.
Key Takeaway
The exemption is specifically for pension benefits paid upon the death of a member.
It should not be interpreted to mean that all pension withdrawals are automatically tax-free.
TAX HOME KENYA LIMITED
Simplifying Your Tax Journey.
📱 WhatsApp/Call: +254 725 416 982
📧 taxhomekenyalimited24@outlook.com
Follow us: @taxhomekenya