08/18/2025
Nigeria’s new tax law has scrapped the familiar personal income tax reliefs and introduced a new rent-based deduction, capped at N500,000 annually | Eagle Media TV Nigeria
The federal government has abolished the longstanding consolidated relief allowance and personal relief for individuals under Nigeria’s personal income tax system, replacing it with a rent-based deduction mechanism as contained in the newly enacted Tax Act.
According to the Act, the total income of an individual for any year of assessment is to be computed as “the taxable income less total deduction”.
Under the new provisions, taxable income includes “assessable profits from trade, business, profession or vocation, employment income, investment income, profits or income from any other source, and chargeable gains from the disposal of chargeable assets”.
Consolidated relief for computing the old tax is N200,000 or 1 percent of gross income, whichever is higher, plus personal relief of 20 percent of gross income.
In their place, individuals can claim rent relief equivalent to 20 percent of the annual rent paid, capped at N500,000, whichever is lower.
“Rent relief of 20% of annual rent paid, subject to a maximum of N500,000, whichever is lower, provided that the individual accurately declares the actual amount of rent paid and other relevant information as may be prescribed by the relevant tax authority,” the Act reads.
The relief is limited to tenants, as the Act makes no provision for homeowners.
Speaking to The Media, John Nwokolo, a tax expert, said the rent relief is structured to favour low-income earners, while high-income earners will pay more tax.
“The consolidated relief allowance will no longer be available for individuals in the new tax act,” Nwokolo said.
“In the case of which is better between the new PAYE tax and the old, that is dicey because in this case of the new rates, those who are earning less than N25 million per annum will tend to enjoy lesser taxes, while those earning N25 million and above will tend to pay higher taxes.
