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What Is Personal Income Tax (PIT)?

Personal Income Tax (PIT) is a direct tax charged on the income of individuals in Nigeria. It applies to anyone who earns income in Nigeria or earns income from Nigeria, whether you are employed by an organization or you work for yourself.

In simple terms, if you earn money as an individual, you are expected to pay personal income tax.

Personal income tax in Nigeria is broadly grouped into two categories:

• Salary Earners (Employees)

• Self-Employed Individuals

  
  

Who Pays Personal Income Tax in Nigeria?

1. Employees and Salary Earners

If you work for a company, organization, or government agency and receive income in any form, personal income tax applies to you.

PIT covers the following types of earnings:

• Salary and wages

• Bonuses

• Overtime payments

• Commissions

• Director’s fees

• Benefits in kind

• Allowances such as:

  • Housing allowance

  • Transport allowance

  • Meal or lunch allowance

  • Utility allowance

  • Leave allowance

  • Medical allowance

For salary earners, personal income tax is deducted under the Pay-As-You-Earn (PAYE) system. This means:

• Your employer deducts the tax from your income

• The tax is remitted to the State Internal Revenue Service (SIRS)

• This applies to both private and public sector employees

  
  

2. Self-Employed Individuals

If you earn income independently and are not on a salary payroll, you are classified as self-employed.

Personal income tax applies to individuals such as:

• Business owners

• Traders

• Freelancers and contractors

• Artisans and vocational workers

• Consultants

• Professionals (lawyers, accountants, engineers, doctors, and similar professions)

Self-employed individuals are required to:

• Register with the tax authority

• Obtain a Tax Identification Number (TIN)

• File and pay tax through Direct Assessment

  
  

What Is Direct Assessment?

Direct Assessment is a tax system where the tax authority assesses an individual’s tax liability based on the income declared by the individual.

How Direct Assessment Works

1. The individual declares their income to the tax authority

2. Allowable business expenses and statutory reliefs are deducted

3. The tax authority assesses the tax payable

4. The assessed tax is paid, usually on an annual basis

Allowable expenses are costs directly related to the business, while reliefs are legal deductions provided by law to reduce taxable income.

Final Note

Understanding who pays personal income tax and how it works helps individuals stay compliant, avoid penalties, and manage their finances better. Whether you are employed or self-employed, personal income tax is a legal obligation that should be taken seriously.