Salary earners in Nigeria are mandated by law to pay tax under the Pay As You Earn (PAYE) scheme. Every month a portion of your salary is deducted as tax leaving you with a net salary to take home.

Taxes under the PAYE scheme fall under the jurisdiction of the State Inland Revenue Service, meaning that all the taxed you pay are remitted to the state of your residence.

For example, if you live in Ogun State but work in Lagos, you are liable to pay tax to Ogun State and not Lagos State.

Nigerian Personal Income Tax Laws have evolved over the years with several amendments introduced to align with the income of Nigerians. The latest amendment was in 2012 when the Goodluck Jonathan Administration signed into law an Amended Personal Income Tax Act, replacing several controversial sections of the act with a simpler and easy to calculate taxable income.

The new amendments affect several sections of the Personal Income Tax Act, particularly Section 33 which deals with Personal Relief and Relief for Children, dependants, etc. This has now being replaced with a Consolidated Relief Allowance (CRA) of N200,000 + 20% of gross income.

They have also reviewed the Minimum Tax upwards from 0.5% to 1% and the Tax Table has also been notably amended.

In this article, we will demonstrate how your personal income tax is calculated using the example of a taxpayer named Mr Ahmed.

**How to calculate your tax payable**

Mr Ahmed earns an Annual Salary Package of N3 million including leave allowance. Mr Ahmed also contributes 2.5% of his basic to the National Housing Fund to enable him to secure a loan.

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Let’s take you through these steps to calculate his taxable income:

(Remember CRA replaces all reliefs including transport, leave allowance, rents etc.)

**Step 1:**

For tax purposes we can break-down his salary as follows:

**Step 2:**

Following which we can now apply the Consolidated Relief of N200,000 plus 20% of Earned Income and also deduct exceptions such as National Housing Fund Contribution (NHF) which is 2.5% of your Basic and also Pension which is 8% of your Basic+Housing+Transport to arrive at your Taxable Income; Please see below:

**Step 3:**

Mr Ahmed will now be taxed on N1,986,538.35 using the new tax table.

From the table above, Mr Ahmed will expect an annual tax deduction of N305,173.05 or a monthly tax deduction of N25,431.09. This is a 10.17% effective tax rate for Ahmed. And this is what his take home will look like:

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The amended law makes it very easy to calculate income taxes unlike before, thus eliminating most of the loopholes that were previously being used to exploit taxpayers.

**But how can I reduce my taxable income?**

The new PAYE template introduced in 2012 makes it more difficult to reduce the amount of taxable income you are subjected to. However, there are still something you can do to reduce your taxable income.

**Pension**

To encourage pension contribution the Government allows employees to contribute more than 8% of your basic, housing, and transport as a pension contribution. By doing so, you get more tax reliefs, thus lower taxable income. Using the example above, assuming you decide to increase your pension contribution from 8% to 10%, your monthly taxes reduce to N24,623 as depicted below:

It is important to note that by doing this your take-home pay will reduce as your salary will be deducted for the extra pension that you contribute. However, you get compensated for this by the extra return you earn on your pension contributions as well as paying lower taxes. Also, assuming you decide to resign and cash in on your pension within 5 years of contributing it, the new pension reform act of 2014 requires that the additional portion contributed will be taxed. Therefore, you will also have to have contributed it for a period of over 5 years to get a tax rebate.

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**Life Assurance**

Life Assurance premiums are those premiums you pay towards insuring an immediate family member in the event that you die. There is no limit to how much you can contribute and how much relief you can get from it. The higher your life assurance, the higher the relief that you get. Assuming Mr Ahmed paid a premium of N500,000 in life assurance during the year and also contributes 10% as pension, His taxes will look like this:

You can see that the tax per month has dropped to N16,139 as against N24,623 when he didn’t pay premiums on life assurance. Just like the increase in pension contribution, this also dents your take home but you get the benefit similarly.

Below is a simple template to help calculate your taxes by yourself. Send us an email or drop a comment if you have issues using it. Help us to help you.

*This article was first published on Ugometrics (Nairametrics) in 2012 and was later updated in 2019.*

Can you please confirm if there has been a change in the template since the recent amendment in June. Cheers.

No changes has been made. The template is fine. Thanks

Please assuming some one is earning #1000000 (one million Naira ) per month. How much suppose to be his tax, paye per month.?

Am having issues with this tax issue deduction. Was trying to figure something out but looks complicated…if i may ask, someone who has an annual gross pay of 4026000…how much is meant to be deducted for PAYE and contributory pension monthly? I’ll L?k to get the answer in my email addy…thanks in advance

use this template http://ugometrics.com/2012/01/26/how-to-calculate-your-taxes-2-using-the-new-personal-income-tax-amendment-act/

Sorry, I meant this template ===>> http://resourcedat.com/2012/01/sample-p-a-y-e-template-based-on-2012-pita-amendment/

Thanks so much.

please kindly send me these new amended personal income tax template in my E-mail thanks

please kindly send me these new amended personal income tax template in my E-mail above

Thanks

Please send a computation of tax relief on INSURANCE PREMIUM.

Thanks

SIR,WHAT IS THE MINIMUM RANGE OF GROSS PAY FOR WHICH 1% CAN BE CHARGED?

This is dependent on what your allowed amount is and your gross pay. Is either 1% of gross pay or (Gross Pay – 200000 -20% of Gross Pay- Other Reliefs) subjected to tax calculator – the one that is higher is used.

Please kindly send into my email box; the current copy(2015) of the Annual return form for PAYE tax IN Nigeria.

oh seen. was looking for this earlier

thank you

[…] https://nairametrics.com/how-to-calculate-your-taxes-2-using-the-new-personal-income-tax-amendment-ac… […]

Hello, great article. I however noted that you did not discuss NHIS and gratuity as tax reliefs. Can you please shed more light on this and possibly amend the template to include these two elements?

Try out this Nigeria income tax calculator: http://africa.calculator.co.ke/nigeria-firs-payroll-income-tax-paye-calculator Should help clear things up!

FOR THOSE NOT EARNING UP TO 300,000 HOW WILL THE TAX BE CALCULATED?

For those not earning up to N300,000 how would the tax be calculated?

300,000 is annually , 25,000 monthly

FOR THOSE NOT EARNING UP TO 300,000 HOW WILL THE TAX BE CALCULATED?

And for those whose taxable income is negative, how would their tax be calculated?

minimum tax applies. 1% of gross income

Thanks, very informative article, please do you sometimes give lectures as relates to taxation and other related concepts as it applies to the workforce.

Great and educative article. Thanks

The part of Exemptions, the pension, I thought it is 8% of B+H+T and not 2.5%. Am I missing anything there?

Am also confuse on the part of Pension . I also thought it is 8% of B + H +T and not 2.5%

Please for those that does not earn up to 300000 annually. e.g 240000, how much am I paying.

What should those earning less than 300000 pay as tax

Interesting and educative write up.

kindly send the template to my mail sir/madam

The link for the updated template is in the write up..https://nairametrics.com/wp-content/uploads/2016/07/PAYE-TEMPLATE-UPDATED-2016.xlsx

The pension Contribution exemption should be 8% of B+H+T. Please throw more light on this.

IS There a lay down yardstick for determining what percentage goes to basic, housing, transport, utility and others? or is just base on individual assumptions

No yardstick

Kindly send me the new PAYE template to my E-Mail Box below, thanks

Thanks for the info. You make it easy to compute.

can I get tax relief for having a life insurance cover

Yes you can.

Thanks for sharing. Do you have this in any spreadsheet all pre-calculated?

Pension is 8% of total emolument based on the pension reform act 2014

Hello. On the taxable income calculation, the template seems to be calculating the LAST 300,000 first before the first 300,000; contrary to what you have on this page. For instance, on a taxable in come of 400,000, I noticed that the template uses 100,000 on 7% and the next 300,0000 on 11% instead of 300,000 on 7% and 100,000 on 11%.

Is it an error? Please clarify.

Thanks for your comments. Our team is having a look at it.

Any feedback on this yet? Kindly reply

Highly educative post. Thank you for sharing about managing PAYE.

SO I CAN USE THE TAX TABLE ABOVE TO COMPUTE PAYE FOR MY EMPLOYEES? ALSO IS THERE A STANDARD RATE FOR MEAL,ENTERTIANMENT ETC. OR ITS JUST INDIVIDUAL ASSUMPTIOM.

No standard rate…just your assumption

please i need answers

For someone that is earning N360,000 how will the computation be done using the template given cos am arriving at a negative figure.

I see the salary is broken down on your excel sheet .

Do you have a sheet that actually works for consolidated wages ?

Also some employers pay the 18% pension contribution for their employees . In this case the person is left with only VC -voluntary contributions as per tax laws. Does your sheet account for this contribution ?and how much tax does it reduce by if it does . Thanks

Hi..the sheet addresses all your questions. You don’t have to stick to the breakdown.

i earn 200,000 monthly,and my firm has not registered with pension fund and national housing fund. so,basically we dont have any relief yet. what would be my tax.

Thank you for this post. It has helped me a great deal. Though i know absolutely nothing about taxes [the part that has 1st 300,000 next 300,000 is greek to me!!]

But using the table i can input the figures i have and get the tax needed. Do you have any idea at all how i can construct a basic payroll sheet? You’re free to laugh before replying.

Thank you

Pls for those earnijg 264, 000

How do one calculate capital relief allowance pro rata?

what about loo earner like 70k

Hello Nairametrics, I am quite confused on how to calculate the proportion of the income that accrues to each section like basic, transport etc. For basic 38.5% of 3000000 should be 1155000 but it is 1153847.20 up there … I would be glad if you reply me in alacrity as my exam is nex week and my professor is making use of this template. Thanks in anticipation. Best Regards

You do not need to follow that proportion. Just distribute your salaries in whatever proportion you desire

Thanks a lot Nairametrics. I found this very useful

Hello Nairametrics, i found your post very informative and helpful. I want to know if performance bonuses, that are based on the employer’s appraisal of performance, are taxable. Thank you.

HI. WHEN IT COMES TO VOLUNTARY CONTRIBUTION YOUR WRITE UP ASSUMES THAT THE VC WOULD BE BASED ON BTH?? THAT IS INCREASE THE PERCENTAGE FOR PENSIO. THIS PERCENTAGE IS APPLIED ON JUST BTH. IS THAT THE CORRECT APPLICATION.

WHAT I HAD PREVIOUSLY HEARD WAS THE VOLUNTARY CONTRIBUTION IS TAKEN FROM THE GROSS PAY. SO IN EFFECT IT REDUCES YOUR PAYE AND INCREASES YOUR NET PAY.

PLEASE ADVISE.

Hello , nice work. i noticed there was nothing about NHIS please throw more light on that aspect and the #200,000 that was added to the consolidated relief, how come about it? Thank you

What is the percentage for calculating personal income tax, for people earning from 100,000 to 360,000 per annum and 480,000 to 720,000.

Please what is the process to start remitting taxes for a company that has not being remitting taxes for its staff.

What about tax template about self employed person.

Thanks

Please i earn #35,000 monthly how much is my monthly payee meant to be

Fantastically helpful!

This is a real eye opener. Just two more questions:

1. Do effective tax rate change per person, within a year if there is no salary adjustment?

2. How are bonuses (such as overtime bonuses, performance bonuses) taxed as this bonuses are not regular and do no not span through the year?

Please i want to know how to know the percentage applicable for various amount of salary. You send the response to my email address

Hello Nairametrics. Good article here. However please note that relief for children and dependent relatives were not removed in the amended PITA 2011. Though not very significant at N10,000 and N4,000 respectively, they still form part of the total exempted income for employees along with CRA, NHF and Pension.

I do I calculate the effective tax rate

How do I calculate tax rate on Xmas bonus

Thank you so much for taking your time with this article, it has been really enlightening for me. Please permit me to ask a few questions (P.S; I am illiterate about taxes and all such subjects with just an idea about basic accounting and finance)

I have downloaded the template as is and tried to input relevant amount and while it mostly correlates, it doesn’t take into account employer pension contribution and national health insurance which are apparently deducted from my gross pay, also i noticed NHF is not deducted from my salary. How does the template apply to me in such a case.

Help my noviceness please.

Once again, please know that i appreciate all you do here and on twitter to educate people like me.

ME

This is great. I Appreciate

This is great article and highly educative.

Thanks for your time

Please to which office or agency does this PAYE goes to.

Because you can’t be deducted without having records

I’ve be taxed for years but I don’t have tax payment evidence.

I need evidence of this payment. so to whom do I report for this evidence after been taxed

The state inland revenue service

how do one calculate hourly or weekly t or biweekly tax,

Hello,

Please for a staff that has a life insurance policy, what documents must he/she submit to the accountant before the premium paid can be treated as a relief to arrive at the net pay.

I would like to mail you my salary details so that I can be sure of the tax am paying

This is so insightful, detailed and explanatory kudos to nairametrics

I would also like you to further explain the 1st 300,000 the next, next till you got the figure 305173.05 in charging the PAYE tax rate

Thank you sir for the templates but I need to clarify issues on overtime and call back duty.is it taxable and if yes what percentage.

Good info and I praise you guys.

If so be how come am I paying 35k to 40k monthly and my take home is no more than 300k

Also for the passed 9 years nothing like tax relief paid to us in TICT.

How can one calculate his P.A.Y..E if the salary is just #30k per month with no other allowance (a contract staff)?

30k is 360,000 per annum

20% gross is=72,000, Consolidation is= 200,000, when u deduct These amouta from the gross, u will be left with taxable income of =88,000

Note. Since the taxable income is below 300,000

Then the paye will be= 88,000 x 7%=6,160 per annum, for monthly paye divide it by 12

I thought since the taxable income is N88,000 which is less than N300,000, 1% will apply on the gross?

@Anitwest,

This is a comprehensive analysis.

Thank you.

To my best understanding, If ur gross salary is not up to 300,000 per annum, then the paye is 1% of the gross salary, but if ur gross salary exceeds 300,000 and above and after deduction of relief, and taxable income left is below 300,000, the Paye should just 7%.of the taxable income

But note: if after deducting the tax relied relief and the taxable income exceed 300,000 then u need to apply the formulas

1st. 300,000 7,%

Next .300,000 10%

Next. 500,000 11%

Next 500,000 19%

Etc.

For #60,000 monthly salary, what I will be the tax

60k=720,000 per annum, 20% gross= 144,000, CR=200,000. So the taxable income is =720,000 -144,000 -200,000 =376,000

Note, the Taxable income above does not include pension . And also since the taxable income is 300k and above, then apply the tax fomular.

Taxable income = 376, 000.

1st 300,000 x 7% = 21,000

Next 76,000 x 11% = 8,360

Adding up =. 29,360 per

annum for monthly divide it by 12

It will give u ur monthly Paye value

Thanks you just made it easy.

what about if there is an overtime, how do we compute the tax for it

Thanks for al the contributions. They’ve been quite educative.

I have been using this formula for quite a while. Thank you so much nairametrics.

My challenge now is this. For someone that his salary net for the year is 2,640,000 that is 220,000 per month net that is PAYE and pension deduction not included. How much will be calculated that is added to this amount for the payment of PAYE and pension.

Please can you expatiate on the Life Assurance. How does an employee take credit for it? I have had issues where an employer says the LIRS officials don’t accept Life Assurance certificate for a tax cut.

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