Thousands of Kenyan families stand to benefit from proposals in the Finance Bill 2026 that seek to protect money paid to loved ones after the death of a pensioner and provide greater clarity on tax exemptions.
One of the key proposals aims to ensure that pension benefits paid to beneficiaries after the death of a pensioner remain free from income tax.
Currently, when a pensioner dies, benefits paid to their spouse, children, or other nominated beneficiaries are not taxed. However, the law does not expressly state this, creating uncertainty and confusion for families.
To address this, the Finance Bill proposes an amendment to Clause 20, Paragraph 53 of the First Schedule to the Income Tax Act to explicitly exempt these benefits from income tax.
In simple terms, if a retired worker passes away, the pension benefits paid to their family or beneficiaries will continue to be received in full, without any tax deductions.
The proposal is intended to 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.
According to Treasury Cabinet Secretary John Mbadi, the proposed changes are part of the government’s broader effort to create fairness, equity, and consistency within the tax system.
The CS has maintained that the Finance Bill 2026 is focused on making tax administration clearer and more equitable while protecting ordinary Kenyans from unnecessary burdens.
If approved, the changes will give families peace of mind that pension benefits paid after the death of a loved one will not be taxed.
The overall goal is to protect family income, provide certainty and make the tax system easier to understand, fairer and more equitable for all Kenyans.
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