FINANCE

PERSONAL INCOME TAX IN NIGERIA

STUDENT SHOULD KNOW THE FOLLOWING

·       CONTRACT OF SERVICE AND CONTRACT FOR SERVICES

 

·       -COMPUTATION OF PERSONAL INCOME TAX

 

·        -RELIEFS AND ALLOWANCES FOR PITA

 

 

CONTRACT OF SERVICE IS EMPLOYMENT AND ARE PAID SALARY. The manner specified in the employment letter.(AYB)-ACTUAL YEAR BASIS

This is subject to employment laws

 

 

CONTRACT FOR SERVICES

Contract for services is self-employment .fee, commission etc.(PYB)-PRECEEDING YEAR BASIS

It is based on the terms of contract and can be terminated at will.

 

 

 
·         RELIEFS AND ALLOWANCES AND TAX EXEMPT DEDUCTIONS
1. CONSOLIDATED ALLOWANCES= 20%+200,000NGN or 1% OF GROSS EMOLUMENT WHICH EVER IS HIGHER.
2. PENSION FROM PENSION REFORMS ACT2014 =8% FOR EMPLOYEE AND 10 PERCENT FOR EMPLOYER. = 15 OR MORE STAFF
3. NHIS (NATIONAL HEALTH INSURANCE) = 1 % OF GROSS EMOLUMENT.
 4. National Housing Fund (NHF) =2.5 %
5. LIFE ASSURANCE PREMIUM.
6. GRATUITY.
OTHERS
-FRANK INVESTMENT INCOME=GROSS DIVIDEND FROM INVESTMENT
-MORTGAGE  INTEREST
 

TAXATION OF SOLE  PROPRIETOR.

BASIS OF ASSESSMENT=PYB

ALLOWABLE EXPENSES.

1.       PENSION AS ALLOWED BY PENSION REFORM ACT 2014.

2.       REPAYMENT OF INTEREST ON LOAN FOR BUSINESS PURPOSE.

3.       BAD DEBT WRITTEN OFF.

4.       BAD DEBT PROVISION  FOR SPECIFIC DEBT.

5.       Legal expenses includes renewal foe short term lease.

6.       Any cost of protecting or defending the business.

7.       Rent or premium for business purpose

8.       Capital allowance as specified by law.

9.       Expenses incurred wholly, reasonably, necessarily and exclusive for the business.

 

NON-ALLOWABLE EXPENSES.

-DEPRECIATION.

-EXPENSES OF CAPITAL NATURE

-PERSONAL EXPENSES.

-PROVISION FOR  DEBT –GENARAL NATURE

-RENEWAL OF LONG TERM LEASE.

-COST OF DEFENDING TRAFFIC OR TAX APPEAL

-FINES AND PENALTIES.

-INCOME TAX PROVISION

-LOSS RECOVERABLE UNDER INSURANCE OR CONTACT OF INDEMINITY

 

NON-TAXABLE INCOME

ANY PROFIT ON THE DISPOSAL OF FIXED ASSET AND INVESTMENT

OTHERS

 

·         -APPLICABLE TAX RATE(PITA)

300,000 7K PER 1 OR 7%
 NEXT 300,000 11K PER 1 OR 11%
 NEXT 500,000 15K PER 1 OR 15%  
NEXT 500,000 19K PER 1 OR 19%
 NEXT 1,600,000 21K PER 1 OR 21%
 ABOVE 3,200,000 24K PER 1 OR 24%.
 
MINIMUM TAX.
1 % OF GROSS EMOLUMENT WHERE  TAX PAYABLE IS LESS THAN.
 
-1 PERCENT OF GROSS EMOLUMENT.
-INCOME LESS THAN 300,000NGN.
ILLUSTRATION
MR .OLU HAS THE FOLLOWING INFORMATION FOR THE PURPOSE OF PERSONAL INCOME TAX COMPUTATION FOR THE YEAR 2016.
WHAT IS THE TAX PAYABLE IF HIS COMPANY DEDUCT  PENSION,NHIS AND NHF.
GRATUITY=500,000NGN
GROSS EMOLUMENT=10,000,000NGN.
GROSS INCOME                                                                                    =10,000,000
CONSOLIDATED  ALLOWANCE= 2,000,000 +200,000                    =2,200.0000
                                                                                                                                7,800,000
ALLOWABLE DEDUCTION
NHF =2.5%                                          250,000
NHIS-1%                                              100,000
PENSION=8%                                     800,000
GRATUITY                                           500,000                                                 1,650,000
                                                                                                                                                                                                                                                                                                                                6,150,000
1st N300,000 @ 7%       21,000
 Next N300,000 @ 11%       33,000
 Next N500,000 @ 15%       75,000
Next N500,000 @ 19%       95,000
Next N1,600,000 @ 21%     336,000
Next N2,950,000 @ 24%   708,000
 Annual Tax Liability  =1,268,000
Monthly Tax 105,667




 

 

 
 
Disclaimer: Obi Azubuike is not by this publication(or post) acting as a professional advisers and therefore not liable for any damage whatsoever for your acting or refraining to act based on  this publication(post). Consult your professional for advice. 


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