The Digest:
In a significant overhaul, the Nigerian government has replaced the old consolidated relief allowance with a new rent relief mechanism. Under the new Tax Act, individuals can now claim 20% of their annual rent, capped at N500,000, offering potential relief for low-income earners.
Key Points:
- New Tax Act: Consolidated relief allowance replaced by rent relief.
- Rent Relief: 20% of annual rent paid, capped at N500,000.
- Taxable Income: Calculated by deducting eligible reliefs from total income.
- Target Group: Rent relief benefits tenants, not homeowners.
- Low-income Focus: Designed to benefit low-income earners more.
- Income Tax Changes: Individuals earning <N25m may pay less tax.
- Example: An individual earning N6m with N1m rent sees a tax reduction.
- Other Deductions: Contributions to NHF, NHIS, and pension schemes are still applicable.
This new tax law is a step towards easing the financial burden of tenants, especially low-income earners. While those earning higher incomes may face higher taxes, the introduction of rent relief aims to provide relief in a challenging economic climate.
Sources: TheCable, Tax Act
