Pay-AS-You-Earn Guide

A Guide on Pay-as-You-Earn (PAYE)Computation based on Personal Income Tax [Ammendment ] Act, 2011.

Step 1.

Compute Consolidated Salary/Gross Emolument (CS)  Determine Consolidated Salary or the gross emolument of the Taxpayer per annum

Step 2.

Compute Consolidated Relief allowance (CRA)Provide relief allowance for N200,000.00 or 1% of the Consolidated Salary/Gross emolument whichever is higher plus 20% of the consolidated salary.


Tax Exempt Items (TEI)Ascertain taxpayer’s contribution or involvement in any of the following Tax exempt items.

  • National Housing Fund Contribution.
  • National Health Insurance Scheme
  • Life Assurance Premium
  • National Pension Scheme
  • Gratuities

Step 4.

Ascertain Taxable IncomeCompute taxable income based on steps 1 to 3 above, which is consolidated salary less Total Relief i.e Chargeable Income = CS- (CRA-TEI)

Step 5.

Apply Income Tax Rate (Tax Band)Apply the following Tax Rates (tax band) to the chargeable income to arrive at the Tax payable per annum.

  • First N300,000.00 @7%
  • Next N300,000.00@11%
  • Next N500,000.00@15%
  • Next N500,000.00@19%
  • Next N1,600,000.00@21%
  • Above N3,200,000.00@24%

Step 6.

Determine the minimum Tax PayableWhere the chargeable Income obtained in step 5 above is lower than 1% of the Consolidated Salary or Gross emolument then, 1% of Consolidated Salary shall be the Tax payable per annum.


Determine Monthly Tax payableThe Tax payable per annum is spread over the 12 months in a year.

Tax Rate
  • 7% First N 300,000
  • 11% Next N 300,000
  • 15% Next N 500,000
  • 21% Next N 500,000
  • 21% Next N 1,600,000
  • 24% Above N 3,200,000

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