INTRODUCTION
The Nigeria Tax Act 2025, signed into law in June 2025 and effective from 1 January 2026, represents a landmark reform in the country’s fiscal landscape, consolidating and modernizing key tax statutes including the Personal Income Tax Act. Among its most significant innovations is the overhaul of personal income tax (PIT) reliefs, designed to make the regime more progressive, equitable, and responsive to contemporary economic realities. Notably, the Act abolishes the long-standing Consolidated Relief Allowance (CRA) – previously a broad-based deduction comprising a fixed amount plus a percentage of gross income – and replaces it with targeted reliefs that prioritize essential living costs and social contributions.
A flagship feature of these reforms is the introduction of rent relief, aimed at easing the housing burden on tenants amid rising accommodation costs. However, the Act retains and refines several other important deductions, including contributions to pension schemes, the National Housing Fund, the National Health Insurance Scheme, life insurance premiums, and mortgage interest for owner-occupied homes. Coupled with a new tax-exempt threshold that shields low-income earners (those with chargeable income of ₦800,000 or less) from PIT liability, these measures seek to protect vulnerable taxpayers while broadening the tax base at higher income levels.
This article examines the full spectrum of personal income tax reliefs available under the Nigeria Tax Act 2025 ) (NTA) (excluding rent relief), detailing their statutory basis, conditions for eligibility, and practical implications. By providing clarity on these provisions, it aims to assist taxpayers, employers, and tax practitioners in navigating the transitioned regime and maximizing legitimate deductions in compliance with the law.
TAX RELIEFS FOR ANNUAL RENT
The Nigeria Tax Act 2025 (effective 1 January 2026) consolidates and amends prior tax laws, including the Personal Income Tax Act (PITA) Cap. P8 LFN 2004, to reform Personal Income Tax (PIT) by abolishing the Consolidated Relief Allowance (CRA) and introducing targeted deductions while retaining several pre-existing ones. The relief is targeted for individuals who pay rent for residential accommodation. This relief is designed to ease the housing cost burden, particularly for tenants in a high-inflation environment.
The deductible amount is 20% of the annual rent paid, subject to a maximum of ₦500,000 (whichever is lower). The relief is available only to individuals who actually pay rent (tenants). Homeowners, those in employer-provided rent-free accommodation, or individuals not paying rent are ineligible. Section 30(2)(a)(vi) of the Nigeria Tax Act 2025 defines it as: “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 claim Requirements must be in writing with supporting documentary evidence (e.g., rent receipts, tenancy agreements). Also, the relevant tax authority (e.g., Federal Inland Revenue Service or State Internal Revenue Service) may require verification and can refuse the claim if evidence is inadequate.
TAX-EXEMPT THRESHOLD FOR LOW-INCOME EARNERS
Individuals with chargeable income (after deductions and exemptions) of ₦800,000 or less annually are effectively exempt from PIT, as the first ₦800,000 is taxed at 0%. This integrates with broader exemptions for gross employment income at or below the national minimum wage. Fourth Schedule (via Section 58 Section 30(2)(a)(i) NTA 2025): “First ₦800,000 at 0%”; Section 30(1) Section 30(2)(a)(i) NTA 2025: “After the relief allowance and exemptions had been granted in accordance with section 30(1)… taxable income… taxed at… 0% on first ₦800,000.” Additionally, Chapter Eight, Section 163(1)(t) Section 30(2)(a)(i) NTA 2025: Exempts “Income of a person from an employment where such person earns gross income of national minimum wage or less from such employment” (defined per National Minimum Wage (Amendment) Act 2024).
By the Section 37 PITA (old law) (alleviation for low income) emphasize pro-taxpayer interpretations for ambiguities, as in Citibank Nigeria Limited v Lagos State Internal Revenue Service (TAT ruling, 2021), the TAT construed exemptions favorably for employment-related payments, prorating PIT for partial-year employment to avoid over-taxation on low earners.
Contributions to Approved Pension Schemes (under the Pension Reform Act) Relief Contributions made by the individual to approved pension schemes are fully deductible from total income. Related pension funds, assets, gratuities, and retirement benefits are also exempt. Section 30(2)(a)(iii) Section 30(2)(a)(i) NTA 2025: “The individual’s contributions under the Pension Reform Act.” Chapter Eight, Section 163(1)(i) and (l) Section 30(2)(a)(i) NTA 2025: Exempts “Pension funds and assets created pursuant to the Pension Reform Act”; “pension, gratuity or any retirement benefits granted in accordance with the Pension Reform Act.” In the case of SK Babalola v Lagos Inland Revenue Service & 2 Ors (National Industrial Court, 2019): The court declared that, under Section 3(1)(e) of PITA (pre-2025), authorities cannot recover taxes from remittances to pension funds, affirming their deductibility and exemption as income derived from employment benefits. This supports the ongoing treatment of pension contributions as non-taxable.
CONTRIBUTIONS TO THE NATIONAL HOUSING FUND (NHF) RELIEF
Payments made by the individual for NHF contributions are deductible from total income. Section 30(2)(a)(i) NTA 2025: “Payments made by the individual… in respect of the individual’s contributions under the National Housing Fund. General Tax Appeal Tribunal rulings on statutory contributions (e.g., in Citibank Nigeria Limited v LIRS, 2021) emphasize that employment-related statutory payments must be deducted if evidenced, aligning with pro-taxpayer ambiguity resolution.
CONTRIBUTIONS TO THE NATIONAL HEALTH INSURANCE SCHEME (NHIS) RELIEF
Payments for NHIS contributions are deductible from total income. Specific Provisions: Section 30(2)(a)(ii) Section 30(2)(a)(i) NTA 2025: “Payments made by the individual… in respect of the individual’s contributions under the National Health Insurance Scheme.
LIFE INSURANCE PREMIUMS RELIEF
Annual premiums paid for life insurance on the individual’s life, their spouse’s life, or deferred annuity contracts are deductible. Section 30(2)(a)(v) Section 30(2)(a)(i) NTA 2025: “Annual amount of any annuity or premium paid by the individual… in respect of insurance on his life or the life of his spouse, or contract for a deferred annuity on his own life or the life of his spouse.
MORTGAGE INTEREST RELIEF
Interest paid on loans used for developing or acquiring an owner-occupied residential house is deductible. Section 30(2)(a)(iv) Section 30(2)(a)(i) NTA 2025: “Interest on loans for developing an owner-occupied residential house. Section 20(a) (pre-2025) confirm deductibility for income-producing loans, provided they are wholly and exclusively for the purpose, as in broader TAT decisions on expense allowability.
These provisions aim to make PIT more equitable by targeting essential expenses, with deductions requiring evidence to prevent abuse (Section 32 NTA 2025: “The relevant tax authority may require… documentary evidence… in the absence… may refuse”).
KEY PRIORITIES FOR STAKEHOLDERS, BURSARY UNITS, ACCOUNTANTS, AND PRINCIPAL MANAGEMENT STAFF IN ORGANISATIONS AND INSTITUTIONS UNDER THE NIGERIA TAX ACT 2025
Having examined the above, these notable and compulsory changes will directly impact the payroll processing, employee net pay, and institutional compliance, particularly for employers (including educational institutions, government bodies, and private organizations) responsible for Pay-As-You-Earn (PAYE) withholding and remittance.
Stakeholders—especially bursary units (common in tertiary institutions for financial management), accountants, HR/payroll teams, and senior management—must prioritize the following to ensure compliance, avoid penalties, and support employees:
1) Update Payroll Systems and Processes Revise payroll software/ERP logic to incorporate:
(a) New progressive tax rates (0% on first ₦800,000 chargeable income; up to 25% on higher bands).
(b) Abolition of CRA and introduction of rent relief (20% of annual rent paid, capped at ₦500,000).
(c) Retained deductions (pensions, NHF, NHIS, life insurance premiums, mortgage interest).
(d) Taxation of gratuity and clearer valuation of benefits-in-kind (e.g., rent-free accommodation capped at 20% of gross income). This is critical to prevent under- or over-deduction of PAYE, which now faces stiffer penalties.
2) Collect and Verify Employee Documentation for Relief: Require employees to submit written claims with evidence (e.g., tenancy agreements, rent receipts) for rent relief and other deductions. Verify Tax Identification Numbers (TINs) for all staff and ensure accurate declaration of actual rent paid (as prescribed by the relevant tax authority). Homeowners or those in employer-provided rent-free accommodation are ineligible for rent relief.
3) Train Staff and Educate Employees: Conduct internal training for bursary, finance, and HR teams on the new rules. Communicate changes to employees (e.g., potential shifts in net pay, especially for low- and middle-income earners) to manage expectations and encourage record-keeping for personal claims.
4) Ensure Timely and Accurate PAYE: Withholding and Remittance Adopt uniform monthly withholding and electronic filing of PAYE returns. Standardize documentation for employee benefits and prepare for enhanced audits by the Nigeria Revenue Service (NRS, replacing FIRS).
5) Review Compensation Structures and Institutional Policies: Assess impact on total reward packages (e.g., housing allowances may become more valuable). For institutions with bursary-managed funds, align student/staff support schemes with new exemptions (e.g., low-income relief).
6) Prepare for Broader Compliance and Risk Management: Monitor upcoming NRS/FIRS implementation guidelines on rent relief verification. Engage tax consultants for audits of current payroll setups and scenario planning for 2026.
These actions will minimize compliance risks, optimize employee take-home pay, and position organizations to benefit from the reforms’ progressive intent. Non-compliance could attract severe penalties under the accompanying Nigeria Tax Administration Act 2025. Senior management should lead cross-departmental task forces to oversee transition by Q1 2026.
Akin Oluwadaisi is a Senior Lecturer & HoD. Jurisprudence and International Law, Adekunle Ajasin University, Akungba-Akoko, Ondo State & Fellow, Centre for Comparative Law in Africa, University of Cape Town,
South Africa; E-mail; akin.oluwadayisi@aaua.edu.ng; 07038211889
