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Section 15

Deductions allowed 

Shortcuts : -1-, -2-, -3-, -4-, -5-, -5A-, -6-, -7-, -8-, -9-,
(1)
For the purpose of ascertaining, the total income of a person for a year of income there shall, subject to section 16, be deducted all expenditure incurred in that year of income which is expenditure wholly and exclusively incurred by him in the production of that income, and where under section 27 any income of an accounting period ending on some day other than the last day of that year of income is, for the purpose of ascertaining total income for a year of income, taken to be income for a year of income then the expenditure incurred during that period shall be treated as having been incurred during that year of income.
(2)
Without prejudice to subsection (1), in computing for a year of income the gains or profits chargeable to tax under section 3(2)(a), the following amounts shall be deducted -
  • (a) bad debts incurred in the production of those gains or profits which the Commissioner considers to have become bad, and doubtful debts so incurred to the extent that they are estimated to the satisfaction of the Commissioner to have become bad, during that year of income and the Commissioner may prescribe such guidelines as may be appropriate for the purposes of determining bad debts under this subparagraph. (*LN-37*)
  • (b) amounts to be deducted under the Second Schedule in respect of that year of income;
  • (bb) amounts to be deducted under the Ninth Schedule in respect of that year of income;
  • (c) expenditure of a capital nature incurred during that year of income by the owner or occupier of farm land for prevention of soil erosion;
  • (d) expenditure of a capital nature incurred in that year of income by a person on legal costs and stamp duties in connection with the acquisition of a lease, for a period not in excess of, or expressly capable of extension beyond, ninety-nine years, of premises used or to be used by him for the purposes of his business;
  • (e) expenditure, other than expenditure referred to in paragraph (f), incurred in connection with a business before the date of commencement of that business where the expenditure would have been deductible under this section if incurred after that date, so, however, that the expenditure shall be deemed to have been incurred on the date on which that business commenced;
  • (f) in the case of the owner of premises, any sums expended by him during that year of income for structural alterations to the premises where the expenditure is necessary to maintain the existing rent; but no deduction shall be made for the cost of an extension to, or replacement of, those premises;
  • (g) the amount considered by the Commissioner to be just and reasonable as representing the diminution in value of any implement, utensil or similar article, not being machinery or plant in respect of which a deduction may be made under the Second Schedule, employed in the production of gains or profits;  (deleting paragraph (g) and substituting therefor the following new paragraph—paragraph  missing in the Finance Act 2023 wef 1st-July-2023 s11) Deleted by (FA 2025-wef 1st July-2025 S10).
  • (g) the amount considered as representing the diminution in value of any implement, utensil or similar article, employed in the production of gains or profits, not being machinery or plant in respect of which a deduction may be made under the Second Schedule, at a rate of one hundred per cent in that year of income;   (FA 2025-wef 1st July-2025 S10).
  • (h) an entrance fee or annual subscription paid during that year of income to a trade association which has made an election under section 21(2); Deleted by FA2020, wef01January2021
  • (i*) in the case of gains or profits of the owner of land from the sale of, or the grant of the right to fell, standing timber which was growing on the land at the time the owner acquired the land – (i) where the land was acquired for valuable consideration, so much of the consideration as the Commissioner may determine to be just and reasonable as representing the cost of the standing timber; or (ii) where no valuable consideration was given for the land, so much of that amount as the Commissioner may determine to be just and reasonable as representing the value of the standing timber at the time the owner acquired the land, as is attributable to the timber sold during that year of income; Deleted by (FA 2025-wef 1st July-2025 S10).
  • (j*) in the case of gains or profits from the sale of standing timber by a person who has purchased the right to fell that timber, so much of the price paid for that right as the Commissioner may determine to be just and reasonable as attributable to the timber sold during the year of income;
  • (k) (Deleted by 8 of 1997 s. 32); Deleted by (FA 2025-wef 1st July-2025 S10).
  • (l) expenditure of a capital nature incurred in that year of income by the owner or tenant of agricultural land, as defined in the Second Schedule*, on clearing that land, or on clearing and planting thereon permanent or semi-permanent crops; Amended by (Finance Act 2022-wef-01-July-2022)*
  • (m) expenditure incurred in that year of income in mining a specified mineral, and for the purposes of this paragraph "expenditure" shall have the meaning assigned to it by paragraph 16 of the Second Schedule as if specified minerals were not excluded from the operation of that paragraph;  Deleted by Finance Act, 2014 effective 01 January 2015
  • (n) expenditure incurred by a person for the purposes of a business carried on by him being -
    • (i) expenditure of a capital nature on scientific research; or
    • (ii) expenditure not of a capital nature on scientific research; or
    • (iii) a sum paid to a scientific research association approved for the purposes of this paragraph by the Commissioner as being an association which has as its object the undertaking of scientific research related to the class of business to which the business belongs; or
    • (iv) a sum paid to a university, college, research institute or other similar institution approved for the purposes of this paragraph by the Commissioner for the scientific research mentioned in subparagraph (iii);
  • (o) any sum contributed in that year of income by an employer to a national provident fund or other retirement benefits scheme established for employees throughout Kenya by the provisions of any written law.
  • (p) expenditure on advertising in connection with a business to the extent that the Commissioner considers just and reasonable; and for this purpose "expenditure on advertising" includes expenditure intended to advertise or promote, whether directly or indirectly, the sale of the goods or services provided by that business;
  • (q) (Deleted by 13 of 1984 s. 19);
  • (r) an amount equal to one-third of the total gains and profits from employment of an individual who is not a citizen of Kenya and - (i) whose employer is a non-resident company or partnership trading for profit; (ii) who is in Kenya solely for the performance of his duties in relation to his employer's regional office, which office has been approved for the purposes of this paragraph by the Commissioner;  (iii) who is absent from Kenya for the performance of those duties for a period or periods amounting in the aggregate to one hundred and twenty days or more in that year of income; and (iv) whose gains and profits from that employment are not deductible in ascertaining the total income chargeable to tax under this Act of his employer or of any company or partnership which controls, or is controlled by, that employer; and in this subparagraph "control" has the meaning assigned to it in paragraph 32 of the Second Schedule.  Amended by(Finance Act 2022-wef-01-July-2022)   Deleted by (FA 2025-wef 1st July-2025 S10).
  • (s) expenditure of a capital nature incurred in that year of income by a person on legal costs and other incidental expenses relating to the authorization and issue of shares, debentures or similar securities offered for purchase by the general public; Deleted by(Finance Act 2020- wef-01January2021)
  • (ss) Expenditure of a capital nature incurred in that year of income by a person, on legal costs and other incidental expenses, for the purposes of listing on any securities exchange operating in Kenya, without raising additional capital.  Finance Act 2006 Effective 1 January 2007 Deleted byFA2020, wef01January2021
  • (t) expenditure incurred by the lessee in the case of a lease or similar transaction as determined in accordance with such rules as may be prescribed under this Act;
  • (u) expenditure of a capital nature incurred in that year of income by a person on rating for the purposes of listing on any securities exchange operating in Kenya. Deleted byFA2020, wef01January2021
  • (v) Club subscription paid by an employer on behalf of an employee;Finance Act 2005 Effective 1 Jan 06 Finance Act 2005 24 Nov. 05Deleted byFA2020, wef01January2021
  • (x) Expenditure of a capital nature incurred in that year of income, with the prior approval of the Minister, by a person on the construction of a public school, hospital, road or any similar kind of social infrastructure; 
  • (y) expenditure of a capital nature incurred in the purchase or acquisition of an indefeasible right to use a fibre optic cable by a telecommunication operator, provided the amount of deduction shall be limited to five per cent per annum; Finance Act 2009 Effective 12 June 2009 , Deleted by(Finance Act 2022-wef-01-July-2022) 

(3)
Without prejudice to subsection (1), in ascertaining the total income of a person for a year of income the following amounts shall be deducted -
  • (a) the amount of interest paid in respect of that year of income by the person upon money borrowed by him and where the Commissioner is satisfied that the money so borrowed has been wholly and exclusively employed by him in the production of investment income which is chargeable to tax under this Act:
    • Provided that -
    • (i) the amount of interest which may be deducted under this paragraph shall not exceed the investment income chargeable to tax for that year of income, and where the amount of that interest paid in that year exceeds the investment income of that year, the excess shall be carried forward to the next succeeding year and deducted only from investment income and, in so far as the interest has not already been so deducted, from investment income of the subsequent years of income; and
    • (ii) for the purposes of this paragraph, "investment income" means dividends and interest but excludes qualifying dividends and qualifying interest.
  • (b) the amount of interest not exceeding one hundred and fifty* three hundred thousand shillings paid*** three hundred and sixty thousand shillings by him in respect of that year of income upon money borrowed by him from one of the first four five six** financial institutions specified in the Fourth Schedule and applied to the construction of,**** purchase or improvement of premises occupied by him during that year of income for residential purposes. 
    2016 Effective 1st January 2017*  (Finance Act 2023 wef 1st-July-2023 s11**) (TLAA 2024 wef 27th December, 2024 S7***) Amended by (FA 2025-wef 1st July-2025 S10).
    • Provided that -
      • (i) if any person occupies any premises for residential purposes for part only of a year of income the deduction under this paragraph shall be reduced accordingly; and
      • (ii) no person may claim a deduction under this paragraph in respect of more than one residence;        
  • (c) (Deleted by 14 of 1982 s. 19);
  • (d) in the case of a partner, the amount of the excess, if any, of his share of any loss incurred by the partnership, calculated after deducting the total remuneration and interest on capital payable to any partner by the partnership and after adding interest on capital payable by any partner to the partnership, over the sum of that remuneration and interest so payable to him less any interest so payable by him;
  • (e) (Deleted by 8 of 1978 s. 9);
  • (f) the amount of any loss realized in computing, in accordance with paragraph 5(2), of the Eighth Schedule, gains chargeable to tax under section 3(2)(f); but the amount of any such loss incurred in a year of income shall be deducted only from gains under section 3 (2) (f) in that year of income and, in so far as it has not already been deducted, from gains in subsequent years of income.  Deleted by (FA 2025-wef 1st July-2025 S10).
  • (g) In the case of a business which is a sole proprietorship, the cost of medical expenses or medical insurance cover incurred for the benefit of the proprietor, subject to a limit of one million shillings per year.
  • (ga) expenditure incurred by a person carrying on a business in payment of Affordable Housing Levy as provided under section 5 (b) of the Affordable Housing Act, 2024. AH Act 2024
(4)
. Where the ascertainment of the total income of a person results in a deficit for a year of income, the amount of that deficit shall be an allowable deduction in ascertaining the total income of that person for that year and the next four nine succeeding years of income: Provided that -
(i) a deficit for the year of income 1973 shall be regarded for the purposes of this subsection as having arisen entirely in that year of income;     (ii) where the income of a married woman is deemed to be the income of her husband, the amount of a deficit in her total income existing at the date of her marriage shall be an allowable deduction in ascertaining the total income of her husband for that year and, insofar as that deficit has not already been deducted, next succeeding four years of income, to the extent of the amount of her income which is assessed on her husband in those years of income.    (iii) Deleted   (iv) Any deficit incurred by a person as at 1st January, 2010 shall be deemed to have been incurred in that year of income   Finance Act 2009 Effective 12 June 2009 Finance Act, 2015 effective 1st Jan 2016 .   Deleted by (Finance Act 2021- wef-01July2021)
Where the ascertainment of the total income of a person results in a deficit for a year of income, the amount of that deficit shall be an allowable deduction in ascertaining the total income of such person for that year and the succeeding five* years of income.  (Finance Act 2021- wef-01July2021) Amended by (FA 2025-wef 1st July-2025 S10*).

(4A) Notwithstanding subsection (4), the Minister may, on the recommendation of the Commissioner, extend the period of deduction beyond ten years where a person applies through the Commissioner for such extension, giving evidence of inability to extinguish the deficit within that period.  Deleted by(Finance Act 2022-wef-01-July-2022) 

------(d) in paragraph 5 by deleting the words “ten years” appearing immediately after the word “beyond” and substituting therefor the words “five years”. Amended by (FA 2025-wef 1st July-2025 S10).---

(5)
(a) A person to whom this subsection applies who has succeeded to a business, or to a share therein, either as a beneficiary under the will or on the intestacy of a deceased person who carried on, solely or in partnership, that business shall be entitled to a deduction in the year of income in which he so succeeds in respect of that part of any deficit in the total income of the deceased for his last year of income as is attributable to any losses incurred by the deceased in the business in that year of income or in earlier years of income.
(b) This subsection applies to a person who is the widow, widower or child of the deceased person and to a person who was an employee or partner of the deceased person in that business; and, where there are two or more of them, each shall be entitled to a deduction of so much of the whole amount deductible as his share in the business under the will or on the intestacy bears to the sum of the shares of all of them.

(5A)
For the purpose of section 3(2)(g), the amount of the net gain to be included in income chargeable to tax is—
(a) if the interest derives more than fifty per cent of its value, directly or indirectly, from immovable property in Kenya, the full amount of the net gain; or  Deleted by  Finance Act, 2015 effective 1st Jan 2016 

(b) for any other case, the amount computed according to the following formula   Finance Act, 2015 effective 1st Jan 2016 
    — A x B/C
Where –
  • A is the amount of the net gain;
  • B is the value of the interest derived, directly or indirectly, from immovable property in Kenya; and
  • C is the total value of the interest.
(6)
For the purposes of this section -
(a) "scientific research" means activities in the fields of natural or applied science for the extension of human knowledge, and when applied to any particular business includes -
  • (i) scientific research which may lead to, or facilitate, an extension of that business or of businesses in that class;
  • (ii) scientific research of a medical nature which has a special relation to the welfare of workers employed in that business, or in businesses of that class;
(b) expenditure of a capital nature on scientific research does not include expenditure incurred in the acquisition of rights in, or arising out of, scientific research but, subject thereto, does include all expenditure incurred for the prosecution of, or the provision of facilities for the prosecution of, scientific research.

(7)
Notwithstanding anything contained in this Act -
(a)The gains or profits of a person derived from one of the six sources* seven** sources of income respectively specified in paragraph (e) of this subsection (and in this subsection called "specified sources") shall be computed separately from the gains or profits of that person derived from any other of the specified sources and separately from any other income of that person;  Finance Act, 2015 effective 1st Jan 2016*  Amended by (FA 2025-wef 1st July-2025 S10**).

(b) where the computation of gains or profits of a person in a year of income derived from a specified source results in a loss, that loss may only be deducted from gains or profits of that person derived from the same specified source in the following year and, in so far as the loss has not already been so deducted, in subsequent years of income;

(c) the subparagraphs of paragraph (e) shall be construed so as to be mutually exclusive;

(d) gains chargeable to tax under section 3(2)(f) and losses referred to in subsection 3(f) of this section shall not be deemed income or losses derived or resulting from specified sources for the purposes of this subsection;

(e) the specified sources of income are -
  • (i) rights granted to other persons for the use or occupation of immovable property;
  • (ii) employment (including former employment) of personal services for wages, salary, commissions or similar rewards (not under an independent contract of service), and a self-employed professional vocation;
  • (iii) employment the gains or profits from which is wife’s employment income, profession the gains or profits from which is wife’s professional income and wife’s self employment the gains or profits from which is wife’s self-employment Deleted by (Finance Act 2023 wef 1st-July-2023 ) 
  • (iv) agricultural, pastoral, horticultural, forestry or similar activities, not falling within subparagraphs (i) and (ii), of this paragraph;
  • (ivA) surplus funds withdrawn or refunded to an employer in respect of registered pension or registered provident funds which are deemed to be the income of the employer under Section 8(10); and
  • (ivB) income of a licensee from one license area or a contractor from one contract area as determined in accordance with the Ninth Schedule.
  • (v) other sources of income chargeable to tax under section 3(2)(a), not falling within subparagraph (i), (ii), (iii) or (iv) of this paragraph.
(8)
In the case of a person whose income includes income chargeable to tax under Section 3(2)(f), only twenty-five per cent of the net chargeable income after deduction of any amount deductible under subsection (3)(f) of this section shall be included in the ascertainment of his total income.Deleted by Finance Act 2006 Effective 1 January 06


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