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PERSONAL INCOME TAX (PIT) FAQ
What is P. A. Y. E?
P. A. Y. E. is an acronym for “Pay As You Earn”. It is a method of collecting personal income tax from employee`s salaries and wages through deduction at source by an employer as provided by the relevant sections of Personal Income Tax Act (PITA).(S.81of Personal Income Tax Act Cap P8 LFN 2004)
Why do PAYE charges vary from Ministries to Ministries for the same level of income/salary?
PAYE does not differ because the rates used for computation are the same. PAYE rates are as shown in question number 4 below.
Is the submission of comprehensive list of staff with PAYE deductions different from submission of annual returns?
No. Comprehensive list of employees with PAYE deductions is continuously submitted on monthly basis steach time PAYE is being remitted to FIRS, while annual returns (form H1) is to be submitted by 31day of January of every year by every employer to enable the Tax Authority ascertain whether the correct deductions and payments of tax have been made for the previous year (period of twelve months) for all its employees.
Where should PAYE deductions of staff working in Abuja but residing in Suleja or Mararaba be remitted to?
By residency rule, an employee's PAYE is payable to the Tax Authority of his/her place of residence. It is therefore the duty of the employer to deduct and remit it to the Tax Authority where the employee is resident that is Niger State Internal Revenue Service or Nasarawa State Internal Revenue Service respectively.
Is it possible to apply for a refund for excess PIT tax deductions/payments?
Yes; the law provides that excess tax paid by any employee shall be refunded on application by the employee with the option of set-off against future tax liability.
What is Gross Emolument/salary?
Personal Income Tax Act (PITA) as amended defines Gross Emolument as the aggregate of wages, salaries, allowances (including benefits-in-kind), gratuities, superannuation and any other income derived solely by reason of employment.
Is it within the law for a state tax authority to charge interest, penalty and threaten distrainment for a shortfall between the PAYE remitted by a company and the expectation on the company`s tax deduction cards, going by the fact that actual tax could differ from expectations as a result of salary cuts and staff exits?
It is lawful for a state tax authority to carry out audit of your returns to ascertain compliance. It is also lawful for penalty to be charged on any shortfall. It should be noted however that there must be reconciliation meeting by both parties where all issues must be discussed and agreed. Where a taxpayer is still not pleased with the decision reached, the taxpayer has the powers as conferred by the PITA (as amended) to appeal to the Tax Appeal Tribunal.
What is the due date for remitting PAYE?
The due date for remitting PAYE is 10 day of every month following month of deduction
What are the current tax rates applied on taxable income?
The current rates applicable to the taxable or chargeable income are as follows:
1st 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%
What is benefit-in-kind?
Benefit in kind may be defined as those benefits or perquisites that accrue to a person by reason of office and/or position he/she occupies. Benefits in kind include such benefits as official car, official accommodation, cooks, gardeners, securities etc. It is taxable after certain deductions/reliefs granted.
What is the minimum tax rate for Personal Income Tax?
The minimum tax rate is 1% of total income. It is applicable if the taxable income is below N300, 000
When there is under deduction of tax in the employee's income, who bears the burden of the under deduction?
When there is an under deduction of tax in staff salary, the staff whose tax is under deducted bears the burden.
What are non taxable deductions under PIT Act?
The sixth schedule of PITA as amended specifies the following as tax exempt. They are:
a) National Housing Fund contributions
b) National Health Insurance Scheme contributions
c) Life Assurance Premium
d) National Pension Scheme) Gratuities
What is the tax implication of giving new/used vehicles to staff for use in an organization?
This is treated as benefit - in - kind. 5% of the value of the vehicle is calculated and added back to the income of staff and taxed.
What is the current Relief claimable under Personal Income Tax Act?
The Personal Income Tax Act (PITA) as amended provides for Consolidated Relief Allowance (CRA) of N200,000.00 subject to a minimum of 1% of gross income whichever is higher plus 20% of gross income and the balance shall be taxable in accordance with the tax rates in schedule six (6) of the Act and as in Question four (4) of this section