How To Calculate Tax Income In Nigeria: With Formula And Examples
Everyone who works will be subject to tax income and this must be paid, especially for countries that have tax laws. This is because taxes are a source of government revenue.
This source of income will be used by the government to fund public interests, especially those related to community services. This individual tax is calculated based on personal income or business income.
How to Calculate Tax Income with Personal Income
The term taxable income will be paid for each individual, but the calculation varies. There are several references that you need to know before paying taxes, especially the minimum income and what percentage of taxes you have to pay.
To determine the tax rate in Nigeria, there are laws that regulate the tax rate of individuals based on the income they have. The minimum income you must have to pay taxes is the first 300,000 which will be taxed at 7%.
For someone who has income below the minimum taxable income, they will get relief and pay lower taxes, namely 1% of their income. Every income has a tax obligation that must be met, thus the tax penalty imposed when a person does not make the required minimum income is merely 1%.
Example of Calculation of Personal Tax
Here’s an example that will help you comprehend the computation of the taxes you must pay. Because the Nigerian government provides relief for personal taxes, especially for calculating health costs, education, or certain expenses.
For now, the national minimum wage in Nigeria is NGN 30,000. So, if you have income around NGN 300,000, then you have to pay the tax 7% of your income. This means that you have to pay NGN 21,000.
The highest tax rate in Nigeria, namely income above 3,200,000, is subject to a tax fee of 24%. This means that if your income is high, then your tax rate is likely to become higher as well.
How to Pay Personal Tax
It is easy to figure out how much tax you have to pay. Then there are several ways you can do to pay taxes. The first way is by PAYE (Pay-As-You-Earn), in which your company or employer will pay this tax directly by deducting your income.
The second way is to do it independently to the relevant tax authorities. Usually, this is done by entrepreneurs or those of you who have income from a personal business. But many employees do this way to pay taxes.
If you work for a company, your company usually deducts taxes from your monthly income. So usually, you only receive net income after deducting taxes.
Then is there a penalty if we don’t pay tax income? According to tax legislation, you may face extra penalty of up to 10% of the tax due.
Due to penalty and the amount of tax that has to be paid, failing to pay it might result in significant financial outlays. So, hurry up to pay personal taxes so the costs are much lower and calculate your financial.
