KRA Rental Income Tax: What Every Kenyan Landlord Must Know in 2026

What is Residential Rental Income Tax?

If you earn rent from residential property in Kenya, you are legally required to pay tax on that income every month. This is called Monthly Rental Income (MRI) tax, a simplified flat rate regime introduced in 2016 specifically for landlords.

The key word is simplified: you pay a flat 7.5% of your gross rental income and you are done. No chasing expense receipts. No separate annual return. The tax is final, meaning KRA considers the matter closed once you pay.

Who Does This Apply To?

The MRI regime covers resident persons, both individuals and companies, who earn rental income from residential property in Kenya. Three income bands determine which regime applies:

Non resident landlords and income from commercial property fall outside this regime and are taxed differently. If you earn from a building with both residential and commercial tenants, the two income streams are separated and taxed accordingly.

You can also opt out of MRI by writing to the KRA Commissioner. This is useful if you have significant deductible expenses and believe the normal graduated regime would result in less tax. This election must be made at least three months before the end of the tax year.

The eRITS System: What It Is and How It Works

In September 2025, KRA launched the Electronic Rental Income Tax System (eRITS), a dedicated digital platform for landlords to register properties, file monthly returns, and pay MRI tax online. It is accessible at erits.kra.go.ke or through eCitizen.

The system requires landlords to register property details including, controversially, their tenants' KRA PINs. This allows KRA to check declared rental income against the tenant's own financial records. For a landlord declaring KES 20,000/month when the tenant's records show KES 60,000/month flowing out for rent, the discrepancy becomes immediately visible.

The 2026 Draft Regulations: What's Changing

On 29 April 2026, KRA published the Draft Income Tax (Residential Rental Income Tax) Regulations, 2026, a proposal to replace the 2016 framework. The draft is currently in public consultation with comments accepted until 25 May 2026. Nothing is law yet, but the direction is clear.

The most important thing to understand: the tax rate and thresholds are not changing. It is still 7.5% on gross rent between KES 288K and KES 15M. What is changing is enforcement and traceability.

1. Mandatory eRITS Registration

Under the proposed rules, every landlord earning rental income within the MRI threshold would be legally required to register their property on eRITS. Clause 7 of the draft states: "A person with income chargeable to residential rental income tax shall register such property in an electronic system prescribed by the Commissioner."

This would replace the current voluntary registration model where landlords largely self declare on iTax without formally registering properties. Each registered property may be assigned a unique identifier, creating a direct paper trail between ownership, rental income, and tax payments.

2. Stricter Record Keeping Requirements

The draft requires landlords to maintain financial records sufficient to calculate and verify the tax due. KRA would gain explicit powers to request these records, summon landlords, and audit declarations. The days of approximate self assessment become significantly riskier.

3. No Expense Deductions

The proposed regulations explicitly disallow expense deductions when calculating MRI tax. This codifies the existing practice. You pay 7.5% of gross rent regardless of your repairs, management fees, or mortgage costs. If you have significant expenses, the opt-out to the normal regime (which allows deductions) becomes more attractive.

4. Property Managers as Tax Agents

The Finance Act 2023 already allows KRA to appoint rental income tax agents. The draft regulations operationalise this. Property managers and agents can be designated to collect and remit the 7.5% tax directly on behalf of landlords. If your property is managed by an agent, the compliance obligation may shift to them.

5. Data Integration with Other Platforms

eRITS is designed to connect with the Ministry of Lands' Ardhisasa platform (property ownership records), eCitizen, and GavaConnect. This cross referencing means KRA can verify declared ownership, compare rent against bank and M-Pesa flows, and flag discrepancies without waiting for a formal audit.

What Happens If You Don't Comply?

Under the current Income Tax Act, failure to file monthly MRI returns attracts penalties and interest. The proposed regulations tighten this further by giving KRA explicit powers to assess estimated tax, freeze bank accounts, and initiate court action for persistent non compliance. Specific penalty amounts are set under the Tax Procedures Act (TPA) and have not been changed by the draft.

The real risk under eRITS is detection, not just penalty. By linking property data to M-Pesa flows, bank records, and the Ardhisasa land registry, KRA is building an enforcement system where under declaration becomes much harder to sustain than it was under pure self assessment.

How to Calculate Your Monthly MRI Tax

The calculation is straightforward since no deductions are permitted:

Remember: if your property is vacant for a month, you still owe a Nil return filed by the 20th of the following month. Failing to file, even with zero income, attracts a late filing penalty.

What Should Landlords Do Right Now?