Personal Income Tax (PIT) Equation: PIT Computation for Sole Proprietor

Personal Income Tax (PIT) Equation: PIT Computation for Sole Proprietor

Personal Income Tax (PIT) Equation: PIT Computation for Sole Proprietor – The thrust of this write-up is on the Personal Income Tax Act  as amended  in Nigeria. This write-up therefore, encompasses such subject matters as Nigerian tax calculator 2018 & 2019, personal income tax calculation formula for earned income (PAYE & Business Profit) and  how to calculate company income tax in Nigeria. Our concern here is how to help you with standard equation and procedure on how to compute your  PIT (Personal Income Tax) so that possibly you get to know how to do it by yourself.

Actually, this post focuses on educating the sole proprietor on how he/she could calculate the  PIT, but this post will also be of great help to students of Accounting and Taxation for quick revisions especially for professional examinations. This is a follow-up on our previous post on Computation of Sole Proprietor’s Tax Liability in Nigeria, which give detail on some of the elements of this equation, you may wish to look it up. At any rate, if you need further explanations, please don’t hesitate to send mail through cfmclimited@gmail.com. We will be glad to help. We can also handle your tax assignments if you allow us to do so.

Personal Income Tax (PIT) Equation: PIT Computation for Sole Proprietor

The Equation:

The following equations apply.
Adjusted Income – Allowable Expenses = Assessable Income ……………Eq. 1.
Assessable Income – Capital Allowance = Taxable Income…………………Eq.2.
Click here for the detail explanations of the elements of these equations.

Now Make Your Claims:

It’s time to claim your tax relief as:
N200,000 + 20% of the gross income (or 200,000 +  1% of the gross income; whichever is higher)
If you are through with the equations, you may now proceed to calculate your tax commitment.
You can now use any of these following methods.
  • First, with the figure generated in equation 2 , you can now deduct all investment incomes you have received such as dividend and interest (unearned incomes) on which tax had been deducted already, to arrive at the net taxable income, OR
  • Secondly, leave the figure generated in equation 2 the way it is and work out your tax liability the normal way. So that, you now minus all taxes you had earlier on paid on your unearned income.  I prefer this because it meets the minimum disclosure principle.

Personal Income Tax (PIT) Equation: PIT Computation for Sole Proprietor

Personal Income Tax (PIT) Equation: PIT Computation for Sole Proprietor

READ ALSO:

Computation of Sole Proprietor’s Tax Liability in Nigeria
Sole Proprietor & Partnership Tax Conditions in Nigeria
Facts You need to Know About Sole Trader’s Tax liability
How do I work out my taxable income in Nigeria?
How companies get their TCC
How Start-ups Get TIN
Business Initial TCC
How to Apply for Company Annual Tax Return Riling
How to Obtain Individual Tax Clearance Certificates
Individual Annual Tax Returns & TCC
Track Your With-holding Tax Credits :

The Tax Rate Table To Apply: In Naira

First 3000,000 @ 7%
Next 300,000   @ 11%
Next 500,000    @ 15%
Next 500,000    @ 19%
Next 1,600,000  @ 21%
Above 3,200,000 @ 24%



How Far My Dear? I hope you are catching the show.

These are simplified equation processes or methods through which you can personally attempt to calculate your PIT liability yourself. So they are good for individuals, workers, Accounting and Taxation students. In fact, wages clerks, Office Managers, and human resources personnel will also find this useful. However, if you need further explanations, send mail to cfmclimited@gmail.com. Contact us also if you want to resolve your personal income tax matters with the Tax offices.
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