Finance Bill 2026: Relief as Death Benefits Remain Tax-Free
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Kenyan families are set to benefit from receiving their deceased loved one’s full pension payment tax-free once the Finance Bill 2026 gets Parliament’s nod.
The Bill seeks to amend Clause 20, Paragraph 53 of the First Schedule to the Income Tax Act to, “explicitly exempt these benefits from income tax.”
Treasury has confirmed in a statement that this clause will clear the doubt in the law to ensure certainty of the exemption of these benefits from income tax.
Tax Exemption for Pension Death Benefits
The Finance Bill 2026 specifically targets the portion of a pension scheme member’s funds paid to a spouse, children, or other dependents following death.
The funds paid out will not be subject to income tax, and beneficiaries will receive the full amount of the benefits without deduction.
While currently there is no tax applied on amounts paid to a spouse, children, or nominees of deceased pension scheme members, the law, unlike the proposed amendment, has not made this explicit, leaving many bereaved families confused.
“The amendment seeks to remove any doubt and provide certainty and protect families during a difficult period by ensuring they can access the financial support left behind by their loved one without fear of taxation,” stated the Treasury.
Also Read: Finance Bill 2026: Five Mobile Phone Taxes Removed, 25% Tax Rate Introduced
Finance Bill 2026 in Kenya, Focusing on Tax Administration Fairness and Protecting Citizens from Burdens
Changes are intended to, according to the National Treasury, safeguard families and ensure that loved ones and financial security are protected.
Cabinet Secretary John Mbadi previously affirmed that Finance Bill 2026 would focus on making tax administration clearer and more equitable while protecting ordinary Kenyans from unnecessary burdens.
“The amendment to the Income Tax Act is part of a broader effort to create fairness, equity, and consistency within the tax system.” Stated Cabinet Secretary John Mbadi.
The bill was tabled in the National Assembly on May 5, 2026, by the Cabinet Secretary for the National Treasury, and, after public participation closed on May 25, 2026, it is now being debated in Parliament.
The Finance Bill is expected to be assented to by the end of June.
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Treasury confirmed the Finance Bill 2026 To Make Pension Benefits for Deceased Members’ Families Tax-Free. Credits PCS
