Nil Returns vs. Full Tax Returns: What’s the Difference and Which Applies to You?

KRA just sent that annual reminder SMS and your stomach dropped. Ukienda iTax, the options “Nil Return” and “Full Return” stare back at you. Which one do you click?

Picking wrong can lead to penalties, or worse, a visit from the taxman. Don’t stress. This guide breaks down the difference between nil and full tax returns in plain language, so you know exactly what applies to your Kenyan hustle.

What Exactly is a Nil Return?

A nil return is your official statement to KRA that you had zero taxable income for that year. It’s like telling them, “Niko active on your system, but this year, hakuna kitu.” You file it to stay compliant and avoid penalties for not filing at all.

Who Should File a Nil Return?

This isn’t for everyone. You should only file nil if your situation fits one of these boxes:

• You were fully unemployed and had no other income sources (like rent, side gigs).
• Your only income was below the personal relief threshold (Currently KES 288,000 p.a.).
• You are registered but your business made a verifiable loss (keep those records!).
• You are a student or dependent with no own-source income.

Filing nil when you earned above the threshold is tax evasion. KRA can track M-Pesa, bank flows, and even your Jumia orders. Don’t play.

And What is a Full Tax Return?

A full return is the detailed declaration of all your income and the calculation of tax due. Here, you tell KRA the full story: your salary, your Airbnb rental in Kilimani, your YouTube adsense, everything. You then pay any outstanding tax or claim a refund if you overpaid.

Who Must File a Full Return?

The list is longer. You fall here if:

• You have employment income but also other side incomes.
• You are a business owner or self-employed (doctor, lawyer, consultant, mitumba seller).
• You earn rental income from properties.
• You have income not subject to PAYE (like freelance writing or boda boda earnings).

Think of it this way: if your money came from more than one pipe, you likely need a full return.

The Real Cost of Getting It Wrong: Penalties in Kenya

This is where it gets real for your wallet. KRA doesn’t joke with deadlines or incorrect filings.

• Late Filing: KES 2,000 for the first month, then KES 1,000 for each subsequent month. For a business, it’s KES 10,000 then KES 2,000.
• Incorrect/Fraudulent Return: A penalty of 50% of the tax avoided. This one hurts.
• Failure to File: KRA can assess your tax themselves (often higher) and add penalties and interest.

That planned weekend getaway to Diani can quickly turn into a penalty payment. File correctly and on time.

The Kenyan Context: iTax, M-Pesa Statements, and the “Hustler” Reality

Let’s ground this in our reality. You’re a graphic designer in Nairobi with a monthly retainer of KES 40,000 (PAYE deducted). You also did three logo jobs last year, earning KES 75,000 paid via M-Pesa. That M-Pesa money? It’s taxable income. You must file a full return and declare that extra KES 75k.

KRA’s system is smarter now. They can data-match. That consistent M-Pesa flow from a known company? They see it. The advice? Keep simple records. Screenshot your M-Pesa statements, use a simple notebook, or an app. When the short rains come and you’re stuck indoors, use that time to organise your records. Don’t wait for the June rush when iTax is crawling.

Also, know your local KRA office. Stuck? Walk into Times Tower, or your nearest Huduma Centre. The staff there can guide you on the spot for free. Better than paying a tax consultant KES 5,000 for a simple query.

Step-by-Step: How to Decide Which Return to File

1. Gather All Income Info: Payslips, M-Pesa business statements, bank statements, rental agreements.
2. Do the Math: Add EVERYTHING up. Is the total more than KES 24,000 per month (the monthly equivalent of the annual relief)?
3. Check the Source: Was tax already deducted (PAYE)? Is the other income “clean” with no tax paid?
4. Decision Point: Total taxable income <= KES 288,000? Consider nil. Anything above or from multiple sources? It’s a full return.

When in doubt, file a full return. It’s safer. Declaring extra income and finding you owe little or no tax is better than filing nil and facing a 50% penalty later.

Final Verdict: Protect Yourself, File Correctly

Understanding nil returns vs. full tax returns is about knowing your obligations and protecting yourself from unnecessary fines. For most active Kenyans juggling multiple hustles, the full return is the reality. The system is digital, but the responsibility is personal. Get your records straight, be honest on iTax, and file before the 30th June deadline. Your peace of mind is worth more than the risk.

What’s your biggest tax filing headache? Share your experience in the comments below. For more practical guides on managing your money in Kenya, check out our article on Side Hustles and How to Tax Them.