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Personal Income Tax (PIT) / PAYE – Exempt Items, Income & Reliefs in Nigeria

Posted on 28 February, 2026
PAYE TAX IN NIGERIA

Personal Income Tax (PIT) / PAYE – Exempt Items, Income & Reliefs in Nigeria

The Individuals and The Income exempted from Pay As You Earn

A. Exempt Individuals / Income

  1. Individuals earning national minimum wage or less (generally exempt from PAYE)
  2. Consolidated Relief Allowance (CRA): ₦200,000 or 1% of gross income plus 20% of gross income (reduces taxable income significantly)
  3. Individuals with very low taxable income after reliefs (effectively no tax payable)
  4. Gifts and inheritances (not treated as taxable income)
  5. Compensation for personal injury, death, or disability (up to ₦50 million)
  6. Gratuities paid under approved retirement schemes
  7. Pensions paid under the Pension Reform Act
  8. Interest on Nigerian Government securities (Treasury Bills, Bonds)
  9. Foreign-earned income of Nigerians, where conditions for exemption are met
  10. Income of diplomats and certain international organization staff (subject to reciprocity)

B. Allowable Deductions & Reliefs

  1. Pension contributions to a Pension Fund Administrator (PFA)
  2. Contributions to the National Health Insurance Scheme (NHIS)
  3. Contributions to the National Housing Fund (NHF)
  4. Interest on loans for owner-occupied residential housing
  5. Life assurance premiums (life insurance or annuity)
  6. Consolidated Relief Allowance (CRA) (major statutory relief)
  7. Rent relief (where applicable by recent policy proposals or employer-backed schemes)
  8. Employment-related allowable expenses (wholly, exclusively, necessarily incurred)

C. Special Reliefs / Incentives (Recent Provisions & Policy Direction)

  1. Reduced PAYE burden for middle-income earners (via graduated tax bands)
  2. Reliefs tied to employment generation (where applicable under fiscal policy updates)
  3. Tax reliefs supporting low-income earners and wage adjustments
  4. Additional relief considerations under evolving finance acts and reforms

D. Important Clarifications

  • Nigeria operates a graduated PAYE system (7% – 24%), so exemptions often come through reliefs and deductions, not outright exclusion.
  • Some items listed as “exempt” in practice are reliefs that reduce taxable income to zero.
  • Proper computation and documentation must comply with relevant tax authority requirements, including the Federal Inland Revenue Service (FIRS) and State Internal Revenue Services.

 

Pro Tip

Maximizing these exemptions and reliefs can legally reduce your tax liability significantly—but only when properly structured and documented.
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