Pension & Reliefs
Understanding tax reliefs and deductions
2025/2026 Tax Exemptions
Personal Income Tax (PAYE) Exemptions:
- Minimum wage earners - completely exempt from tax
- First ₦800,000 taxable income - 0% tax (from gross income up to ₦1,200,000)
- Gifts received - fully exempt
- Reduced PAYE for those earning up to ₦20 million annually
Allowable Deductions & Reliefs
Pension Contributions
Contributions to approved Pension Fund Administrators (PFA) are fully deductible - up to 8% employee + 10% employer contributions.
National Health Insurance Scheme (NHIS)
NHIS contributions are tax-deductible, reducing your taxable income.
National Housing Fund (NHF)
NHF contributions (typically 2.5% of basic salary) are fully deductible.
Housing Loan Interest
Interest paid on loans for owner-occupied residential housing qualifies as a deduction.
Life Insurance & Annuity Premiums
Premiums paid for life insurance or annuities are tax-deductible.
Rent Relief
20% of annual rent paid, up to a maximum of ₦500,000 per year.
Pensions & Gratuities - Exempt
- Pension funds and assets under the Pension Reform Act (PRA) are tax-exempt
- Pension, gratuity, or retirement benefits granted under PRA - fully exempt
- Compensation for loss of employment up to ₦50 million - exempt
Capital Gains Tax (CGT) - Exemptions
- Sale of owner-occupied house - exempt
- Personal effects or chattels worth up to ₦5 million - exempt
- Sale of up to 2 private vehicles per year - exempt
- Gains on shares below ₦150 million per year or gains up to ₦10 million - exempt
- Gains on shares above exemption if proceeds are reinvested - exempt
- Pension funds, charities, and religious institutions (non-commercial activities) - exempt
Companies Income Tax (CIT) - Exemptions
- Small companies (turnover ≤ ₦100M, assets ≤ ₦250M) - 0% tax
- Eligible startups - fully exempt
- Compensation relief - 50% additional deduction for salary increases or wage awards
- Employment relief - 50% deduction for salaries of new employees retained for 3+ years
- Agricultural businesses - 5-year tax holiday for crop production, livestock, dairy, etc.
- Venture capital gains from labeled startups - exempt
Value Added Tax (VAT) - 0% or Exempt
- Basic food items
- Rent
- Education services & materials
- Health & medical services
- Pharmaceutical products
- Small companies (≤ ₦100M turnover)
- Diesel, petrol, solar equipment
- Agricultural inputs (fertilizers, seeds, feeds)
- Disability aids
- Shared passenger transport
- Electric vehicles & parts
- Humanitarian supplies
- Baby products
- Sanitary products
- Land and buildings
Withholding Tax - Exemptions
- Small companies - exempt from WHT on their income
- Manufacturers - exempt from WHT
- Agricultural businesses - exempt from WHT
- Small companies' payments to suppliers - exempt from WHT deduction
Stamp Duties - Exemptions
- Electronic transfers below ₦10,000 - exempt
- Salary payments - exempt
- Intra-bank transfers - exempt
- Government securities or share transfers - exempt
- Stock and share transfer documents - exempt
Consolidated Relief Allowance (CRA)
The CRA is a standard relief granted to all taxpayers. It's calculated as the higher of ₦200,000 or 1% of gross income, plus 20% of gross income. This relief is automatically applied to reduce your chargeable income.
Pension Contributions
Contributions to approved pension schemes are tax-deductible up to certain limits. The deduction reduces your chargeable income, effectively lowering your tax liability.
Key Points:
- Employee contributions: Up to 8% of salary
- Employer contributions: Up to 10% of salary
- Must be to an approved pension fund administrator (PFA)
How Reliefs Reduce Your Tax
All allowable deductions and reliefs are subtracted from your gross income before calculating tax. This reduces your taxable income, which means you pay tax on a smaller amount - directly lowering your tax liability.
Example:
- Gross Income: ₦5,000,000
- CRA (auto-calculated): ₦1,200,000
- Pension (8%): ₦400,000
- NHF (2.5%): ₦125,000
- Taxable Income: ₦3,275,000
- Tax is calculated only on this reduced amount