Understanding PAYE Tax in Nigeria
Pay As You Earn (PAYE) is a method of collecting Personal Income Tax from employees' salaries. In Nigeria, this tax is regulated by the Personal Income Tax Act (PITA) and its amendments.
Every employee earning a gross income is liable to pay tax, which is deducted at source by the employer and remitted to the relevant State Board of Internal Revenue service (SBIR).
How PAYE is Calculated
- Consolidated Relief Allowance (CRA): The first step is deducting the CRA, which is ₦200,000 or 1% of gross income (whichever is higher) plus 20% of gross income.
- Pension Contributions: 8% of your basic + housing + transport allowance is tax-exempt.
- NHF & NHIS: Contributions to National Housing Fund and Health Insurance are also tax-deductible.
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