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What is the Nigeria Tax Act 2025?
The Nigeria Tax Act 2025 ("NTA") is a comprehensive legislation signed into law on June 26, 2025, which consolidates all major tax provisions in Nigeria into a single statute. It repeals several existing tax laws, including the Personal Income Tax Act, and it took effect from January 1, 2026.
What is "chargeable income" under the Nigeria Tax Act 2025?
Chargeable income is defined under Section 30(1) as the total income of an individual less eligible deduction.
Formula: Chargeable Income = Total Income - Eligible Deductions, Where:
- Total Income includes employment income, business income, investment income, and chargeable gains
- Eligible Deductions are the allowable deductions listed in Section 30(2)(a)
What types of income are taxable under Section 4?
Section 4 of the Act defines income, profits, or gains that are chargeable to tax for individuals, including:
1. Employment Income
2. Business and Professional Income
3. Investment Income
4. Other Taxable Income (Section 4(1)(h):
- Prizes, winnings, honoraria, grants, awards
- Profits from disposal of property or fixed assets
- Profits from digital or virtual assets
What are the key deductions allowable under Section 30 of the Nigeria Tax Act 2025?
Section 30(2)(a) provides for "eligible deductions" which individuals can claim to reduce their taxable income. The six main deductions are:
1. Rent Relief -Rent relief is a new deduction introduced under Section 30(2)(a)(vi), allowing individuals to deduct 20% of annual rent paid, subject to a maximum of ₦500,000, whichever is lower, provided the individual accurately declares the actual amount of rent paid.
2. Pension Contributions: Section 30(2)(a)(iii) allows employees to deduct contributions made under the Pension Reform Act. Only the employee's 8% contribution, calculated on basic salary, housing allowance, and transport allowance, is deductible. The employer's 10% contribution is excluded from taxable income.
3. National Housing Fund (NHF): Section 30(2)(a)(i) permits the deduction of contributions made under the National Housing Fund. Employees earning ₦3,000 or more monthly must contribute 2.5% of their basic salary. These contributions are fully deductible from taxable income, reducing overall tax liability.
4. NHIS Contributions: Section 30(2)(a)(ii) provides that contributions under the National Health Insurance Scheme are deductible. All NHIS payments made by employees can be subtracted from taxable income, thereby lowering tax liability. However, proof of payment must be presented to claim this deduction. 5. Life Insurance Premiums: Section 30(2)(a)(v) allows deduction of any annuity or premium paid by the individual in respect of insurance on his life or the life of his spouse, or contract for a deferred annuity on his own life or the life of his spouse.
6. Housing Loan Interest: Section 30(2)(a)(iv) permits the deduction of interest on loans taken to develop an owner-occupied residential house. The loan must be for the taxpayer's own home, and the property must be occupied by the owner. Proof of interest payments is required to claim this deduction.
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