A Guide on Pay-as-You-Earn (PAYE) Computation based on Personal Income Tax [Amendment ] Act, 2011.
Compute Consolidated Salary/Gross Emolument (CS)
Determine Consolidated Salary or the gross emolument of the Taxpayer per annum
Compute Consolidated Relief allowance (CRA)
Provide relief allowance for N200,000.00 or 1% of the Consolidated Salary/Gross emolument whichever is higher plus 20% of the consolidated salary.
Tax Exempt Items (TEI)
Ascertain taxpayer’s contribution or involvement in any of the following Tax exempt items.
- National Housing Fund Contribution.
- National Health Insurance Scheme
- Life Assurance Premium
- National Pension Scheme
Ascertain Taxable Income
Compute taxable income based on steps 1 to 3 above, which is consolidated salary less Total Relief i.e Chargeable Income = CS- (CRA-TEI)
Apply Income Tax Rate (Tax Band)
Apply the following Tax Rates (tax band) to the chargeable income to arrive at the Tax payable per annum.
- First N300,000.00 @7%
- Next N300,000.00@11%
- Next N500,000.00@15%
- Next N500,000.00@19%
- Next N1,600,000.00@21%
- Above N3,200,000.00@24%
Determine the minimum Tax Payable
Where the chargeable Income obtained in step 5 above is lower than 1% of the Consolidated Salary or Gross emolument then, 1% of Consolidated Salary shall be the Tax payable per annum.
Determine Monthly Tax payable
The Tax payable per annum is spread over the 12 months in a year.