Connect with us

ECONOMY

New Tax Law Introduces Rent Relief Capped at ₦500,000 for Nigerians

Published

on

New Tax Law Introduces Rent Relief Capped at ₦500,000 for Nigerians

A newly enacted tax law in Nigeria has introduced a rent-based relief for individual taxpayers, allowing eligible residents to deduct up to ₦500,000 from their annual taxable income — a major shift from the previous system that relied on consolidated and personal relief allowances.

Under the new framework, tenants can now claim 20 percent of their annual rent as tax relief, subject to a maximum of ₦500,000, depending on whichever is lower. This provision, according to the Act, applies only to individuals who accurately declare the amount of rent paid and submit the required documentation to relevant tax authorities.

The policy overhaul replaces the old tax regime that provided a consolidated relief allowance of ₦200,000 or 1 percent of gross income (whichever is higher), plus a 20 percent personal relief on gross earnings. With the removal of those blanket allowances, rent payments have become the main basis for individual tax deductions.

RELATED NEWS  I Slept in Dangote Cement Factory on Natasha’s Wedding Day - Akpabio

The new law defines taxable income as total earnings from trade, profession, employment, investments, capital gains, or other sources, minus allowable deductions — with rent now taking centre stage in what qualifies as a deductible expense.

Only Tenants Eligible, Homeowners Excluded

One of the key limitations of the policy is that it offers no benefit to property owners. The rent relief is strictly for tenants, leaving out homeowners regardless of mortgage obligations or housing-related expenses.

Tax expert John Nwokolo told TheCable that the reform is tailored to favour low- to mid-income earners, particularly those who spend a significant portion of their income on rent. “It’s structured in a way that people earning below ₦25 million annually will likely see lower tax obligations, while higher earners may face increased taxes,” he said.

RELATED NEWS  Tinubu seeks stronger US-Africa ties

For example, an individual earning ₦6 million a year and paying ₦1 million in rent would get a ₦200,000 tax deduction under the new system (20 percent of ₦1 million). This would leave ₦5.8 million as taxable income and result in an annual tax of ₦834,000.

By comparison, under the old system, the same individual would have received a ₦1.4 million deduction (₦200,000 consolidated relief plus 20 percent of gross income), leaving a taxable income of ₦4.6 million and a higher tax bill of ₦896,000. This indicates that some taxpayers may actually benefit more from the new rent relief system, depending on income and housing costs.

Other Recognised Deductions

In addition to rent relief, the Act maintains certain deductions, including contributions to the National Housing Fund (NHF), National Health Insurance Scheme (NHIS), pension schemes, life insurance premiums, deferred annuities, and interest on loans used to develop owner-occupied homes.

RELATED NEWS  Akpabio Worst Senate President Nigeria Ever had -Natasha

Moreover, the first ₦800,000 of an individual’s annual income is now tax-exempt, providing marginal relief for lower-income earners.

While implementation details are still being awaited from the Federal Inland Revenue Service (FIRS) and state tax authorities, the new rent-based deduction marks a significant departure from Nigeria’s previous tax relief structure and is expected to impact how individuals manage their housing and financial declarations going forward.

Share

Discover more from Naijanewstoday

Subscribe to get the latest posts sent to your email.

We serve you the recent Political, Entertainment, Sports, news in Nigeria today from latest celebrity news, Opinion, photos, scandals & many more. We are dressed with compelling News and Opinion articles that grow unique visitors and we ensure returning visitors become loyal readers.

TRENDING

Discover more from Naijanewstoday

Subscribe now to keep reading and get access to the full archive.

Continue reading