How to calculate Pay-As-You-Earn tax in Abia State in 2022

If your business, irrespective of its size, has staff, then you will need to file for Pay-As-You-Earn tax at the Internal Revenue Scheme of your business location. In this case, residents of Abia state, are to file their Pay-As-You-Earn tax in any of the Abia State Internal Revenue Service locations close to them.

Most workers see Pay-As-You-Earn (PAYE) deductions in their salaries at the end of the month and are barely aware of what these deductions are for and how they are calculated. This and more will be explored in this article.

What is Pay-As-You-Earn tax?

You might have heard your boss mention PAYE or seen it on your payslip, but you don’t know what it means. The acronym PAYE stands for “Pay As You Earn,” and all it actually means is that you are paying the Internal Revenue Service (IRS) the tax you owe on a monthly basis rather than all at once at the end of the tax year.

This is advantageous because it prevents you as a taxpayer from having to pay the Internal Revenue Scheme between 20% and 48% of your taxable income in cash all at once each year.

Everything boils down to ensuring sure that the country’s residents are paying their fair share of taxes to the government. It is taken out of the workers’ salaries straight away. Therefore, it is important that you adhere to the payment of this tax as an employer or employee.

A monthly salary or remuneration for each employee must be reduced by income tax and national insurance payments, which must then be paid to the FIRS in accordance with PAYE regulations. This ought to be a monthly ritual. Therefore, it is preferable that you comprehend PAYE’s principles and operational details.

Abia State Internal Revenue Service

One of the main financing agencies of the government, the Abia State Internal Revenue Service, has taken on the task of raising the IGR of the State via the adoption and execution of several techniques that have had a good influence on revenue production and collection.

The Abia State Board of Internal Revenue Service was established on August 27, 1991, when Abia State separated from the former Imo State. The Abia State Board of Internal Revenue Law 2008, which established the Abia State Internal Revenue Board and Abia State Internal Revenue Service, the operational branch of the Board, went into effect on July 17, 2008.

The Board is in charge of tax assessment and collection from people and organizations that are not corporations as approved by relevant federal and state laws.

How are Pay-As-You-earn Tax rates calculated in Abia state

There is a standard calculation formula for all Pay-as-You-Earn tax in Nigeria irrespective of the state. Therefore, a civil servant in Abia state earning a particular amount of money will also pay the same Pay-As-you-Earn tax as someone who earns that amount of money in Lagos.

Below is an example of how the Pay-As-You-Earn tax is calculated.

  • The first ₦300,000 of your income is taxed at 7%
  • The next ₦300,000 are taxed at 11%
  • The next ₦500,000 are taxed at 15%
  • The next ₦500,000 are taxed at 19%
  • The next ₦1,600,000 are taxed at 21%
  • The tax rate for income above ₦3,200,000 is 24%

You can also apply the formula above to your taxable income.

An example of these tax calculations is seen below:

The Personal Income tax for an individual whose gross income is 4 million naira is calculated using the standard formula for amounts higher than three hundred thousand naira. Here, it is assumed that pension is calculated at 7.5% of gross income.

Gross Income (GI)- 4, 000, 000

Consolidated relief allowance- Amount higher than N200, 000 or 1% of Gross income

20% of Gross income- N800, 000

Children-: N2, 500 per child (maximum of 4) N10, 000

Dependent relatives: N2000 per Dependent relative (maximum of 2) –N4, 000

Pension: 7.5% of Gross income- N300, 000 N1, 314, 000

Taxable income: N2, 686, 000

Annual incomePIT rateTax payable
First ₦‎300,0007%₦‎ 21,000
Next ₦‎300,00011%₦‎33,000
Next ₦‎ 500,0005%₦‎75,000
Next ₦‎ 500,0015%₦‎75,000
Next ₦‎ 500,00019%₦‎95,000
Next ₦‎1,600,0021%₦‎228,00
PAYE: ₦‎452,060
Net Income after Pay-As-You-Earn: ₦‎3,547,940

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