Question 1

How is PITA calculated in Nigeria?

Accepted Answer

Under the Personal Income Tax Act (PITA) as amended by the Finance Act, your taxable income is your gross income minus the Consolidated Relief Allowance (CRA) and any approved pension deductions. CRA equals 20% of gross income plus the higher of 1% of gross income or ₦200,000. Progressive tax bands then apply from 7% on the first ₦300,000 up to 24% on income above ₦3.2 million of taxable income.

Question 2

Are RSA pension contributions tax-deductible?

Accepted Answer

Yes. Under the Pension Reform Act 2014, your mandatory employee RSA contribution (minimum 8% of monthly emoluments) is deductible from gross income before PITA is assessed. Additional voluntary contributions to your RSA are also deductible, making them a highly efficient way to both save for retirement and reduce your current tax bill.

Question 3

What counts as gross income?

Accepted Answer

Gross income for PITA purposes includes basic salary, housing allowance, transport allowance, meal allowance, and all other employment benefits including leave allowances. Legitimate business expense reimbursements are excluded. Your employer should provide a full breakdown on your payslip.

Question 4

What is the Consolidated Relief Allowance (CRA)?

Accepted Answer

The CRA replaced the old system of individual personal allowances. It consists of two parts: a flat 20% of gross income, plus the higher of 1% of gross income or ₦200,000. Everyone is entitled to this deduction automatically — you do not need to apply for it. It significantly reduces the taxable income of lower and middle earners.

Question 5

Why does my effective tax rate differ from the stated band rates?

Accepted Answer

Nigeria uses a progressive (marginal) tax system. The band rates (7%, 11%, 15%, 19%, 21%, 24%) only apply to the portion of taxable income within each band — not to your entire income. Your effective rate is the total tax divided by total gross income, which is always lower than your marginal (top) rate. This is why high earners may face a 24% marginal rate but only a 12–18% effective rate.

Income Tax Calculator (PITA)

How Nigerian PITA Is Calculated

Frequently Asked Questions

How is PITA calculated in Nigeria?

Are RSA pension contributions tax-deductible?

What counts as gross income?

What is the Consolidated Relief Allowance (CRA)?

Why does my effective tax rate differ from the stated band rates?

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