STUDENT
SHOULD KNOW THE FOLLOWING
·
CONTRACT OF SERVICE AND CONTRACT FOR SERVICES
· -COMPUTATION OF
PERSONAL INCOME TAX
· -RELIEFS AND ALLOWANCES FOR PITA
CONTRACT OF SERVICE IS EMPLOYMENT AND ARE PAID SALARY. The manner
specified in the employment letter.(AYB)-ACTUAL YEAR BASIS
This is subject to employment laws
CONTRACT FOR SERVICES
Contract for services is self-employment .fee, commission etc.(PYB)-PRECEEDING
YEAR BASIS
It is based on the terms of contract and can be terminated at will.
·
RELIEFS AND ALLOWANCES AND TAX EXEMPT
DEDUCTIONS
1. CONSOLIDATED
ALLOWANCES= 20%+200,000NGN or 1% OF GROSS EMOLUMENT WHICH EVER IS HIGHER.
2. PENSION FROM
PENSION REFORMS ACT2014 =8% FOR EMPLOYEE AND
10 PERCENT FOR EMPLOYER. = 15 OR MORE STAFF
3. NHIS (NATIONAL
HEALTH INSURANCE) = 1 % OF GROSS EMOLUMENT.
4. National Housing Fund (NHF) =2.5 %
5. LIFE ASSURANCE
PREMIUM.
6. GRATUITY.
OTHERS
-FRANK INVESTMENT
INCOME=GROSS DIVIDEND FROM INVESTMENT
-MORTGAGE INTEREST
TAXATION OF SOLE PROPRIETOR.
BASIS OF
ASSESSMENT=PYB
ALLOWABLE EXPENSES.
1.
PENSION
AS ALLOWED BY PENSION REFORM ACT 2014.
2.
REPAYMENT
OF INTEREST ON LOAN FOR BUSINESS PURPOSE.
3.
BAD DEBT
WRITTEN OFF.
4.
BAD DEBT
PROVISION FOR SPECIFIC DEBT.
5.
Legal
expenses includes renewal foe short term lease.
6.
Any cost
of protecting or defending the business.
7.
Rent or
premium for business purpose
8.
Capital
allowance as specified by law.
9.
Expenses
incurred wholly, reasonably, necessarily and exclusive for the business.
NON-ALLOWABLE EXPENSES.
-DEPRECIATION.
-EXPENSES OF CAPITAL NATURE
-PERSONAL EXPENSES.
-PROVISION FOR
DEBT –GENARAL NATURE
-RENEWAL OF LONG TERM LEASE.
-COST OF DEFENDING TRAFFIC OR TAX APPEAL
-FINES AND PENALTIES.
-INCOME TAX PROVISION
-LOSS RECOVERABLE UNDER INSURANCE OR CONTACT OF
INDEMINITY
NON-TAXABLE INCOME
ANY PROFIT ON THE DISPOSAL OF FIXED ASSET AND INVESTMENT
OTHERS
·
-APPLICABLE
TAX RATE(PITA)
300,000 7K PER 1 OR 7%
NEXT 300,000 11K PER 1 OR 11%
NEXT 500,000 15K PER 1 OR 15%
NEXT 500,000 19K PER 1 OR 19%
NEXT 1,600,000 21K PER 1 OR 21%
ABOVE 3,200,000 24K PER 1 OR 24%.
MINIMUM TAX.
1 % OF GROSS EMOLUMENT WHERE TAX PAYABLE IS LESS THAN.
-1 PERCENT OF GROSS EMOLUMENT.
-INCOME LESS THAN 300,000NGN.
ILLUSTRATION
MR .OLU HAS THE FOLLOWING INFORMATION FOR
THE PURPOSE OF PERSONAL INCOME TAX COMPUTATION FOR THE YEAR 2016.
WHAT IS THE TAX PAYABLE IF HIS COMPANY
DEDUCT PENSION,NHIS AND NHF.
GRATUITY=500,000NGN
GROSS EMOLUMENT=10,000,000NGN.
GROSS INCOME
=10,000,000
CONSOLIDATED ALLOWANCE= 2,000,000 +200,000 =2,200.0000
7,800,000
ALLOWABLE DEDUCTION
NHF =2.5%
250,000
NHIS-1% 100,000
PENSION=8% 800,000
GRATUITY 500,000 1,650,000
6,150,000
1st N300,000 @ 7% 21,000
Next
N300,000 @ 11% 33,000
Next
N500,000 @ 15% 75,000
Next N500,000 @ 19% 95,000
Next N1,600,000 @ 21% 336,000
Next N2,950,000 @ 24% 708,000
Annual Tax Liability =1,268,000
Monthly Tax 105,667
Disclaimer: Obi Azubuike is not by this publication(or post) acting as a professional advisers and therefore not liable for any damage whatsoever for your acting or refraining to act based on this publication(post). Consult your professional for advice.
Copyright(c)2018-Obi Azubuike
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