Salary earners and employees in Nigeria are obligated to pay their taxes under the Pay As You Earn (PAYE) scheme.
As a salary earner, a portion of your salary is deducted as tax, thereby leaving you with a net salary to pocket for that month.
Lots of people are looking for a guide to calculate PAYE in Nigeria. If you are looking for this information, this post is for you.
In Nigeria, the Federal Inland Revenue Service (FIRS) is the government’s agency that oversees remitting of taxes in Nigeria. Here are some taxes that rare expected of Organisations to be remitted to the government:
>Do You Want To Receive Update As Soon As We Publish? join our Telegram Channel stay updated with the latest headlines--CLICK HERE
- Stamp Duties;
- National Information Technology Development Fund Levy;
- Companies Income Tax;
- Value Added Tax;
- Educational Tax;
- Capital Gains Tax;
- Withholding Tax.
- Petroleum Profit Tax;
- Personal Income Tax;
This article centers specifically around Personal Income Tax. ‘PAYE’ simply stands for Pay As You Earn.
It is through this tax system that people who earn their salaries in Nigeria pay their taxes. This taxation system is not only used in Nigeria but also in other countries, including Australia, the United Kingdom, New Zealand, etc.
According to the Personal Income Tax (Amendment) Act of 2011, all salary earners and employees in Nigeria are required to pay their taxes based on residency.
For instance, if you live in Anambra State but work in Lagos State, your taxes will be paid to the government of Anambra State.
The category of people exempted from paying the Personal Income Tax (PIT) are workers in the military service, expatriates and foreign residents who earn salaries in Nigeria and residents of Abuja (FCT).
Steps to calculate PAYE in Nigeria
For you to remit the portion of your salary to give to the FIRS, you need first to calculate the amount of taxable income. You’ll have to deduct reliefs and exemptions such as the money spent on children (up to 4) or dependent relatives (up to 2), consolidated relief allowance (CRA), and payment to the pension fund.
For you to calculate your taxable income, you need to deduct the following:
• Pension relief (at least 8%).
• CRA (20% of GI plus ₦200,000 OR 1% of GI);
• Dependent relatives (₦2,000 per relative) and/or reliefs on children (₦2,500 per kid).
• And other payments (if applicable).
You will need a calculator to help you calculate PAYE.
Also, if you are well-versed in Microsoft Excel, you can make use of the software to do the calculations for you.
Here is a more detailed and well-explained guide on how to calculate PAYE in Nigeria.
◊SPONSORED ♦◊On April 25th 30th, 2021, Mitrobe network will be hosting a special training session on understanding cryptocurrency, crypto trading basics with binance and how to profit and make at least $100 daily from market volatility. Also, how to master pair to pair (P2P) trading ,withdraw and deposit monies to your bank account without hitches. --CLICK HERE
◊Register Your Business Name and Company With CAC and Get it in less than 2 weeks--CLICK HERE
◊ Get Free ₦1,000 plus 5% - 15% interests on savings and over 35% return on investments: Create a Free Account on PiggyVest --CLICK HERE