Taxation in Nigeria can be confusing, but we can at least help you with your consolidated relief allowance. Find out what it is and how you can calculate it in this article. It is much easier than you would have expected! So get your calculator out and let’s get to it.
What is consolidated relief allowance?
If you have been a legal adult for quite a while know, chances are, you remember the times when there was no such thing as consolidated relief allowance in the system of tax in Nigeria. However, not that long ago, in 2011 to be precise, the new Personal Income Tax (Amendment) Act was introduced.
Before this act, there were all sorts of reliefs available for tax payers, including personal relief, relief for alimony, unmarried children, dependants and/or a disabled taxpayer. It was all quite confusing, which is why they have all been merged into consolidated relief allowance, or CRA. Now, it is very easy to calculate your reliefs, and we want to tell you how you can do that yourself.
How to calculate consolidated relief allowance in Nigeria
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To be fair, there is barely any math involved in calculating the consolidated relief allowance Nigeria. The whole process has been made very simple to help the taxpayers. As long as you have a calculator on hand (or you are good at calculating percentages in your head), you should have no issues with this.
If you want to calculate your CRA, you need to know your earned income and gross income. Earned income includes your salary/wage, pension, gratuity, allowances, bonus, benefits and so on. Gross income includes your earned income and unearned income (interest, dividend, fees, rent and so on).
Once you tally up those, calculate 20% of your earned income. Then, calculate 1% of your gross income. If it is less than ₦200,000, add ₦200,000 to the aforementioned 20%. If it is more, then add the number you have gotten to those 20%.
If it seems too confusing, let us explain how this works on a simple example. Say, John’s annual earned income is ₦15,600,000. His gross annual income is ₦19,000,000. Therefore, 15,600,000*20%=3,120,000. This is one part of the CRA. 19,000,000*1%=190,000, which is less than ₦200,000. Thus, he needs to add ₦200,000 to ₦3,120,000. As a result, John’s CRA is ₦3,310,000.
Let’s have another example. Mary’s annual earned income is ₦25,000,000. Her gross annual income is ₦31,000,000. Therefore, 25,000,000*20%=5,000,000. This is one part of the CRA. 31,000,000*1%=310,000, which is more than ₦200,000. Thus, she needs to add ₦310,000 to ₦5,000,000. As a result, Mary’s CRA is ₦5,310,000.
See? It is really easy once you use an example. If you want to calculate your monthly CRA, you can simply divide the number you receive by 12. You can also use the handy calculator from FIRS, where you simply have to enter all the relevant information, and it will do the calculations for you. We hope that this has been helpful to you, and you have come to understand your country’s taxes a little bit better.
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