The Personal Income Tax (PIT) is the most common tax type in the country. Interestingly, many taxpayers don’t understand the way this tax is deducted and as a result, there are often questions about it.

#1 What is PIT?

The origin of the PIT can be traced to the Personal Income Tax Act No 30 of 1996.

Basically, PIT is deducted as a result of trade, business, profession, vocation for a period of time and applies to personal emoluments such as wages or salaries, gratuity, superannuation or pension schemes as well as any other income derived by reason of employment.

These include salary, wage, fee, allowance or other gain or profit from employment including compensations, bonuses, premiums or other benefits given by the employer to the employee whether temporary or permanent.

Also, it can be applied to the gain or profit arising from a right granted to anybody for the use or occupation of any property. It is also applicable to dividends, interest, discount, pension as well as annuity.

#2 What is the difference between PAYE and PIT

PAYE is a type of PIT. It is the acronym for Pay as You Earn. It is a model of collecting income tax from employees by deducting from their source which is their employer as stipulated in section 81 of the Personal Income Tax Act Cap P8 LFN 2011.

It is expected that the PAYE is remitted at the 10^th day of the month following the deduction.

#3 What are the categories of people that should pay PIT?

The categories include:

• persons employed in the Nigerian Army, the Nigerian Navy, the Nigerian Air Force, the Nigerian Police Force other than in a civilian capacity;

• officers of the Nigerian Foreign Service;
• every resident of the Federal Republic of Nigeria who earns an income or profit from a business in Nigeria;
• anyone residing outside Nigeria who derives income or profit from Nigeria.
• itinerant workers; this category is often charged by the state in which they have worked for any given year
• communities; this occurs when it is impossible to assess each member of the community individually
• trustees of any settlements or estates according to the Second Schedule to this Act.