No deduction is allowed for any expenses that are private or domestic in nature. Such expenses include costs of maintaining the individual's family and residence, costs of commuting to work, and costs of clothing worn to work.
Individuals are allowed deductions for donations made to amateur sporting associations, religious institutions, charitable institutions, or educational institutions of a public character. However, the allowed amount cannot exceed 5% of the chargeable income.
Interest incurred on a debt by an individual is only allowed to the extent that the debt obligation was incurred in the production of income included in gross income.
The first UGX 2,820,000 of a resident individual's annual income falls in the nil tax bands and does not suffer tax. This is the amount allowed to an individual tax free.
In determining the income chargeable to tax, an individual is allowed by the law to make the following deductions from one’s gross income:
- All the expenditures and losses that were incurred by a person during the year of income to the extent to which the expenditures and losses were incurred in the production of the income that is included in gross income.
- Any loss incurred by the individual on the disposal of a business asset during the year of income.
- In cases where the individual receives rental income, an amount equal to 20% of the rental income is allowed as expenditure and losses incurred in the production of that income. The balance is then taxed at 20%.
- Interest on a mortgage from a financial institution incurred to acquire or construct premises generating rental income.
- Local service tax paid by an individual.
Any expenditure or loss that is business in nature but which is recoverable under any form of insurance or contract is not allowable for deduction.