About this calculator
This person income tax calculator approximates your monthly and annual personal income tax in accordance with the Nigerian current tax law.
How to use?
Using this calculator is easy and takes just a few steps:
- Enter your gross monthly or annual income, include your basic salary and any taxable allowances.
- Add your allowable deductions; such as pension contributions, NHF, NHIS, life insurance premiums, and mortgage interest.
What Counts as Taxable Income?
The question of what is the taxable income is very important in case you wish to have a fair estimate of your personal income tax in Nigeria. Basically taxable income refers to any type of income that is subject to taxation according to the law in the Personal Income Tax Act and its amendments.
The basic salary is the most usual constituent of taxable income. It is the amount that your employer pays you without any deductions. Most of the allowances that you are receiving are also taxable in addition to your basic salary. These can be housing allowance, transport allowance, utilities and other monetary benefits that are offered as a part of your employment. Even fringe benefits, including a company car or accommodation, are in some cases taxable when they can be measured to have a definite economic advantage.
Otherwise, bonuses and overtime compensation are also considered as taxable income. Any additional amounts which raise your income, whether regular or not, are a part of your chargeable income. Conversely, certain allowances or reimbursements such as certain travel reimbursements, or certain statutory benefits, can be treated as exempt by virtue of the way they are formulated.
Moreover, payments to pension funds, National Housing Fund (NHF) and National Health Insurance Scheme (NHIS) are usually deductible on your gross income without the taxation. This implies that even though they are included in your gross salary, they bring down the figure that would end up under the PAYE.
It is also worth mentioning that interest charged on certain savings, dividends, and other incomes of the investments can be classified as personal income tax, which is determined according to the regulations and quotas established by the Federal Inland Revenue Service (FIRS).
How often is PAYE deducted?
Employers calculate PAYE and deduct it to employees on a pay period basis, however, practically PAYE is considered a monthly deduction, employers compute tax owed on salary earned per month and deduct the same. This withholding is the PAYE liability of an employee gathered by the employer at the source.
Once deduction is done, the employers are required to pay the PAYE to the corresponding tax authority (the State Internal Revenue Service where the employee is employed or corresponding federal office in some cases). The remittance or filing date is usually on or before the 10 th day of the month where the salary was received.
Along with monthly remittances, employers are normally obliged to submit an annual PAYE return (a report of the total PAYE withheld by an employer in a year). Various states have this annual return which must be filed by 31 January of the next year with evidence of payments.
Although the federal PAYE tax bands are identical in Nigeria, the administration and collection of taxes may be different depending on the state. Every state in Nigeria consists of its own State Internal Revenue Service (SIRS) charged with the enforcement and collection of personal income tax in the state.
This means that:
- Collection and remittance: The PAYE is remitted to the state in which the employee is employed but not necessarily the state in which the employee dwells.
- Administrative regulations: There are other states that might need other forms, special filing, or other specific documentation other than federal instructions.
- Minimum tax and exemption: States are free to use various administrative requirements over minimum tax or tax exemption to low-income earners, but not to violate federal tax bands.
To the majority of employees, employers automatically take care of these variations, hence you do not even have to calculate them.
What happens if I earn below the taxable threshold?
where your annual income is less than or equal to ₦800,000, under the new law you are not liable to personal income tax and therefore the PAYE should not be deducted on your income.