You are lucky to stumble on this article on how to calculate PAYE. Many employees feel cheated when they couldn't get answers to the breakdown of their total take-home package analysis.
Don’t be scared you can actually get involved in the calculation as this article will be your complete guide. You will do yourself good by quickly looking at the previous post on Tax Obligations for entrepreneurs in Nigeria so that you can get acquainted with different taxes in Nigeria.
Note that the Federal Internal Revenue Service (FIRS) and State Board of Internal Revenue Service (SBIRS) are agencies responsible for collecting taxes in Nigeria.
The Employers of Labour are deemed to be the unpaid agent of the tax authority for the purpose of deducting and remitting the taxes from the salaries due to the employees.
BUT, WHAT IS PAYE?
The abbreviation P.A.Y.E. stands for Pay-As-You-Earn and it is a Tax payment method in which an employer is required by law to deduct income tax from an employee’s taxable wages or salaries.
Remittances of PAYE are based on your place of residence irrespective of where you work. For instance, if you live in Lagos and you work in Rivers State your tax remittances for PAYE is paid directly to Lagos State Internal Revenue Account.
Don’t be scared about calculating the PAYE yourself, even professionals get scared with the process at times, but determination and interests are key to this course. Let’s get practical as this article will give a layman explanation to calculating PAYE yourself.
But before we calculate the PAYE, you need to know the following;
₦ ₦
Basic Pay XX
Housing Allowance XX
Transport Allowance XX
Leave Allowance XX
Other Allowance XX
13th Month Salary XX
GROSS PAY/TOTAL EMOLUMENTS XX
Less
CRA (Consolidated Relief Allowance) (XX)
Pension (8% of Total Emolument) (XX)
National Housing Fund (NHF) (XX) (XX)
.
TAXABLE INCOME XXXXX
Please note that CRA is calculated as 200,000 or 1% of Gross income (whichever is higher) plus (+) 20% of Gross Income. After arriving at the Taxable income, you will use the graduated table below to calculate the amount of tax payable for each of the segments, add them up and you will get to the amount of tax to be paid to the FIRS or SIRS. Below is the graduated table.
ANNUAL AMOUNT (₦)
|
MONTHLY AMOUNT(₦)
|
RATE (%)
|
First ₦300,000
|
First ₦25,000
|
7%
|
Next ₦300,000
|
Next ₦25,000
|
11%
|
Next ₦500,000
|
Next ₦41,667
|
15%
|
Next ₦500,000
|
Next ₦41,667
|
19%
|
Next ₦1,600,000
|
Next ₦133,333
|
21%
|
Above ₦3,200,000
|
Above ₦266,667
|
24%
|
Continue reading for more practical analysis.
If you have any suggestions or feedback from this article or ideas on future articles you think we should research and write, please send us an email at onaaramichael@gmail.com
i can help you out with an adsense account are you interested?
ReplyDelete