Instalment Tax and Balance of Tax are governed under the Income Tax Act, Cap 470, Laws of Kenya, specifically Section 12 (Instalment Tax) and Section 92 (Balance of Tax).

The deadline for the first instalment tax payment is Monday, 20th April 2026. This serves as a reminder for all businesses to comply to avoid penalties and interest.

What is Instalment Tax?

Instalment Tax is an advance payment of income tax made to the Kenya Revenue Authority (KRA) before the end of the year of income. It is calculated based on the taxpayer’s estimated annual tax liability.

It applies where:

1. The expected annual tax liability exceeds KES 40,000
2. Income is not fully subject to Pay-As-You-Earn (PAYE). 
3. This system helps taxpayers spread their tax obligations evenly throughout the year rather than paying a single large amount at year‑end.
    

How is instalment Tax Calculated?

Taxpayers may use either of the following methods:

1. Prior Year Basis – 110% of the tax payable in the previous year. 
2. Current Year Estimate – Based on projected profits less any applicable withholding tax credits. 

Payment Schedule

Instalment tax is payable in four equal instalments on the following dates:

1. 1^st Instalment due on 20th April 2026
2. 2^nd Instalment due on 20th June 2026 
3. 3^rd Instalment due on 20th September 2026 
4. 4^th Instalment due on 20th December 2026 

For businesses in the agricultural sector:

1. 75% is payable by the 9th month.
2. 25% is payable by the 12th month. 

What Is Balance of Tax?

Balance of Tax is the difference between total tax payable for the year and installment tax already paid. 

It is payable by the end of the fourth month after the financial year-end. For example, for businesses with a December year-end, the deadline is 30th April of the following year.

Penalties for non-compliance

• Underpayment of instalment tax attracts a penalty of 20% of the shortfall. 
• Late payments attract 5% penalty on the unpaid tax plus monthly interest. 

Conclusion
Timely payment of the first instalment tax and any Balance of Tax ensure compliance with Kenya Revenue Authority (KRA) requirements and helps avoid unnecessary penalties.