Nil returns or income tax returns: which one is yours?
Filing nil returns in Kenya is quick, which is exactly why so many people file one when they should not. A nil return tells KRA that you had no income at all during the year. If that is true, it is the right return and it takes minutes. If it is not true, you have filed a false return, and the problems start later, usually when you least expect them.
This guide explains who really qualifies for a nil return, how a P9 form from an employer changes your obligation, what other types of income mean you need a different return, and what happens when the wrong one is filed.
Who qualifies for nil returns in Kenya
A nil return is for a person who holds a KRA PIN but earned no taxable income in the whole tax year, January to December. Typical examples are full-time students, people who were unemployed for the entire year, and people who registered a PIN for a purpose such as a bank account, a SIM card or a job application but have not yet earned anything.
The key words are "the whole year". If you worked for even two months, and an employer paid you a salary, you had employment income for that year. The fact that you are unemployed today does not change what happened last year. The same goes for casual work paid through a payroll, an internship with a stipend that went through PAYE, or any business that made sales.
Being a student is not an automatic pass either. A student who did paid attachment, tutoring, online work or a holiday job that paid through a payroll had income for that year. Equally, a person who is technically unemployed but sold goods at a market, drove for a ride-hailing app or did paid freelance work had business income. The question is not your job title; it is whether money was earned.
Some people also think that because their income was low, it does not count. Low income is still income. Even if no tax ends up being due because of personal relief, the return you file must show the income. Our page on KRA nil returns filing covers what we need from you if nil is the right choice.
When a P9 changes everything
A P9 is the form your employer gives you showing your salary, benefits and the PAYE deducted for the year. If you received one, you were employed, and you must file an employment income return using the figures on it. A nil return is not an option for that year.
Employees often ask why they need to file at all when PAYE was already deducted. The annual return is how you confirm your income, claim reliefs such as insurance relief or mortgage interest, and declare any other income on top of your salary. It is also how KRA reconciles what your employer said with what you say. If the two do not match, the system flags it.
A P9 also matters if you left the job early in the year. Many people who resign or are laid off in the first quarter assume the year is now a nil year. It is not: those months of salary, and the PAYE deducted from them, belong on an employment return. Filing correctly can even work in your favour, because the reliefs for the full year sometimes mean you overpaid and are owed money back.
If you had more than one employer in the year, you need every P9. People who changed jobs often file with only the latest one, which understates their income and can leave a tax balance to pay later. Our employment income (P9) returns service files with all your P9 forms together.
Other income that rules out a nil return
Employment is not the only income that matters. If you sell goods or services, even informally, that is business income. Depending on your turnover you may fall under turnover tax, which is filed separately, or you may need to declare business income on your annual return. Either way, a nil income tax return does not describe your situation honestly.
Landlords have their own regime. Residential rental income within a certain band is taxed under monthly rental income tax, filed every month rather than once a year. Rental income outside that regime goes on the annual return. Owning a rented room or two counts.
Income from a side business and a salary in the same year is common, especially for people who run a small shop, a matatu or a farm while employed. In that case the return combines both: the P9 figures for the job and the business figures alongside. Filing only the employment part leaves the business income undeclared, which is the same problem as a wrong nil return, just smaller.
Other examples include consultancy fees, commissions, farm sales and income from abroad for a resident. If money came in from any of these during the year, you need a return that shows it. When in doubt, it is safer to file a full return showing small income than a nil return that is wrong.
What happens if you file the wrong return
KRA receives information from employers, banks, the land registry, M-Pesa business tills and other sources. When a nil return sits next to a P9 submitted by your employer, the mismatch is visible. KRA can reject the return, amend it and assess the tax it believes you owe, along with penalties for an incorrect return.
A wrong nil return also blocks things you might want later. If you overpaid PAYE, for example because you left a job mid-year, the refund only comes through a correct employment return. A nil return gives up that claim. A wrong return can also stop a Tax Compliance Certificate from being issued until it is corrected.
If you already filed the wrong one, it can be fixed by filing an amended return with the right figures. It is much better to correct it yourself than to wait for KRA to find it. And if you missed the deadline altogether, read what late KRA filing really costs before you catch up.
Common questions
I lost my job in March. Can I file a nil return?
Not for that year. You were employed for part of it, so you file an employment return with the P9 for those months. If you earned nothing at all the following year, that year can be nil.
Do students need to file anything?
Yes, if they have a KRA PIN. A student with no income files a nil return every year by 30 June. It is free and avoids the late filing penalty.
My employer deducted PAYE. Why do I still owe?
Usually because of a second job, income your employer did not know about, or a relief claimed that did not apply. The annual return brings all income together, which can show a small balance.
Can I change a return after filing it?
Yes. iTax lets you file an amended return for the same period with the correct details. The amended one replaces the original.
Is a nil return the same as not filing?
No. A nil return is a filed return that tells KRA you had no income. Not filing at all leaves the year open and triggers the late filing penalty once the deadline passes.
Which year am I filing for?
The return you file by 30 June covers the previous January to December. A return filed in the middle of one year therefore describes what you earned in the year before it.
Official sources