The National Assembly has shed more light on a proposal contained in the Finance Bill 2026 that seeks to fully exempt pension benefits paid to dependants of deceased pension scheme members from income tax.
The clarification comes ahead of a nationwide public participation exercise on the Finance Bill 2026, which is scheduled to begin on June 2 across 13 counties.
According to Parliament, the proposal is aimed at easing the financial burden faced by families following the loss of a loved one by ensuring beneficiaries receive the full value of pension benefits without tax deductions.
Relief for Bereaved Families
In a statement released on Monday, the National Assembly explained that the proposed amendment would apply to pension benefits paid to spouses, children and other recognised dependants of deceased pension scheme members.
If approved, the measure would ensure that beneficiaries receive 100 per cent of the pension benefits accumulated by the deceased during their working life.
“The bill seeks to cushion families during their most difficult times. It proposes that pension benefits paid out to spouses, children, or dependants of a deceased pension scheme member will be entirely exempt from income tax,” Parliament stated.
Lawmakers say the proposal is intended to strengthen social protection by preserving retirement savings for families who often face significant financial challenges after losing a breadwinner.
Public Participation Begins Across 13 Counties
The clarification comes as the National Assembly’s Departmental Committee on Finance and National Planning prepares to launch a week-long public participation exercise on the Finance Bill 2026.
The forums will be held in 13 counties and will provide Kenyans, businesses, civil society organisations and other stakeholders with an opportunity to submit their views on the proposed tax and revenue measures.
The committee is expected to gather feedback on several provisions contained in the Bill, including tax reforms, revenue enhancement measures and proposals designed to strengthen social welfare programmes.
Public participation is a constitutional requirement and forms a critical part of the legislative process before Parliament considers and debates the Bill.
Enhancing Financial Security
Supporters of the proposed pension tax exemption argue that the measure will provide much-needed financial relief to families during periods of grief and economic uncertainty.
By removing income tax obligations on death benefits, dependants would be able to access the full amount intended by the deceased member, helping them meet education, healthcare and household expenses without additional financial strain.
The proposal is among several measures contained in the Finance Bill 2026 that seek to balance revenue collection with social protection and economic support for vulnerable groups.
Feedback collected during the public participation exercise will help shape the final version of the Bill before it is tabled for debate and consideration by the National Assembly.
