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In Nigeria, the Personal Income Tax Act (PITA) serves as the primary legislation governing the taxation of individuals, communities, families, trustees, and estates. Within the framework of the PITA, taxes are imposed on the total income of taxable entities, with certain exemptions detailed in the Third Schedule to the PITA, Items One and Two of the Sixth Schedule, or other pertinent sections like Sections 19 & 20.

Examination of Tax Reliefs and Deductions:

  1. Expenses Meeting WENR Criteria (Section 20(1)): Expenses wholly, exclusively, necessarily, and reasonably incurred in income production are deductible when computing the income or loss of an individual.
  2. Interest Expenses (Section 20(1)(a)&(b)): Interests paid on loan facilities used as capital in income generation are deductible. Mortgage interests for occupied houses are also allowable deductions for Personal Income Tax (PIT) purposes.
  3. Rent/Accommodation Expenses (Section 20(1)(c)&(d)): Rent for business premises is a deductible expense. Costs for repairing business premises and equipment are also deductible, with limitations for premises used for both business and domestic purposes.
  4. Bad Debt (Section 20(1)(e)): Bad debts proven to be irrecoverable during the relevant assessment period are deductible for PIT purposes.
  5. Research Expenses (Section 20(1)(i)): Costs incurred on research, including levies paid under the National Agency for Science and Engineering Infrastructure Act, are deductible for PIT purposes.
  6. Contributions (Item (2), Sixth Schedule)): Contributions to the National Pension Scheme, National Housing Fund, National Health Insurance Scheme, life assurance premiums, and gratuity are deductible for PIT purposes.
  7. Consolidated Relief Allowance (CRA) (Section 33): CRA, a comprehensive tax relief, is deductible for PIT calculations. It is granted based on the higher of N200,000 or 1% of gross income + 20% of gross income.
  8. Reimbursements: Law permits the deduction of reimbursed expenses, provided third-party invoices/receipts are provided.
  9. Income of Exempt Organizations (Items 13, 16, 21, and 22 of the Third Schedule): Income of ecclesiastical, charitable, educational institutions, trade unions, registered friendly societies, and cooperative societies, not derived from a trade or business, is exempt from tax.
  10. Dividends (Item 25, Third Schedule): Dividends paid by a Nigerian company to a person meeting certain criteria are tax-free for a specified period.
  11. Compensation for Loss of Employment (Items 17,18,23, and 26 of the Third Schedule): Gratuities, death gratuities, and compensation for loss of employment are deductible for PIT purposes.
  12. Income Earned Abroad (Items 29, 30, and 31, of the Third Schedule): Certain incomes earned abroad are deductible for PIT purposes when brought into Nigeria.
  13. Earnings from Securities (Item 31 A, Third Schedule): Incomes earned from specified bonds are deductible for PIT purposes.
  14. Earnings Below Minimum Wage (Item 33, Third Schedule): Income below the National Minimum Wage is exempt from PIT.
  15. Consular Fees (Items 5&11, Third Schedule): Consular fees received on behalf of a foreign State are exempt from PIT.
  16. Interest Accruing to Non-Residents (Item 6, Third Schedule): Interest accruing to non-residents on specified financial instruments is exempt from PIT.
  17. Income of Local Government (Item 12, Third Schedule): The income of local governments or government institutions is exempt from PIT.
  18. Interest on Agricultural Loan (Item 7, Third Schedule): Interest on agricultural loans is exempt from PIT.
  19. Income from Technical Service Assistance (Item 27, Third Schedule): Income of a foreigner employed under a technical assistance arrangement with the Nigerian Government is exempt from PIT.
  20. Interest on Foreign Currency Domiciliary Accounts (Item 28, Third Schedule): Interest on foreign currency domiciliary accounts is exempt from PIT.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, You can also reach us via WhatsApp at +2348038460036.