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A New Era for Personal Taxation
The NTA 2025 repeals and replaces the Personal Income Tax Act (PITA) 2011, addressing long-standing ambiguities and introducing a more transparent, inclusive, and equitable tax regime. The reforms are designed to align Nigeria’s tax system with global best practices while ensuring that taxation supports, rather than stifles, economic growth.Read more: Nigeria Tax Reform Act: What Businesses Need to Know
Key Provisions of the NTA 2025 and their Implications
- Expanded Definition of Chargeable Income: The Act broadens the scope of taxable income to include:
- Prizes, winnings, and honoraria; Grants and awards; Profits from digital or virtual assets; Gains from the disposal of property and securities.
- This expansion ensures that income from emerging sectors and informal sources is captured, thereby widening the tax net and boosting government revenue without increasing tax rates for compliant individuals [NTA 2025, Section 4].
- Introduction of Rent Relief Deduction: For the first time, individual taxpayers can claim 20% of their annual rent (up to a maximum of ₦500,000) as an Eligible Deduction, provided valid tenancy documentation is provided. This provision is particularly beneficial for salaried workers and urban dwellers, offering meaningful relief from housing-related expenses [NTA 2025, Section 30 (2) (vi)].
- Abolition of the Consolidated Relief Allowance (CRA): The CRA, previously a blanket deduction for all taxpayers, has been repealed. In its place, the Act introduces a more itemized and transparent system of deductions, encouraging accurate reporting and aligning tax reliefs with actual expenses incurred.
- Enhanced Compensation for Loss of Office: The tax-exempt threshold for compensation due to loss of office has now been increased from ₦10 million to ₦50 million. This change provides greater financial protection for individuals facing job termination or workplace-related injuries [NTA 2025, Section 50 (1)].
- Revised Progressive Tax Bands: The Act introduces a new progressive tax structure, adjusting rates from the previous 7%–24% under PITA to 0%–25% under the NTA. This ensures that:
- Low-income earners (earning the minimum wage and below /month) are exempt from income tax
- Middle-income earners benefit from reduced tax burdens
- High-income earners contribute a fairer share of their income towards national development [NTA Fourth schedule).
- Clarified Definitions for Key Tax Terms: To eliminate ambiguity and reduce disputes, the Act provides precise definitions for terms such as:
- Non-Resident Individual (NRI); Interest; Dividend; Royalty
- This clarity enhances legal certainty and simplifies compliance for both taxpayers and tax administrators [NTA 2025, Sections 7-8, 202].
Read more: Why IFRS 18 Should Be a Strategic Priority for CFOs and Financial Leaders
Beyond Compliance: A Pathway to Financial Empowerment
The NTA 2025 is not merely a legislative update, it is a strategic tool for financial empowerment. By offering targeted reliefs and incentives, the Act encourages individuals to: Plan their finances more effectively, leverage available deductions and engage proactively with the tax system. For employers, the reforms necessitate a review of payroll systems, employee benefits, and vendor engagement processes to ensure full alignment with the new tax framework.Read more: Stransact expands horizon, unveils Deals and Advisory Services
