ICANBusiness, Management and FinanceBusiness and its Environment2024

Under the Personal Income Tax Act (PITA) Cap P8 LFN 2004 (as amended by the Finance Act 2020), which of the following is the CORRECT treatment of the Consolidated Relief Allowance (CRA) for a Nigerian resident individual with an annual gross income of ₦9,600,000?

ACRA = ₦200,000 + 20% of gross income = ₦200,000 + ₦1,920,000 = ₦2,120,000
BCRA = ₦600,000 + 20% of gross income = ₦600,000 + ₦1,920,000 = ₦2,520,000CORRECT
CCRA = ₦200,000 only, as the 20% relief was abolished by the Finance Act 2020
DCRA = 1% of gross income + ₦200,000 = ₦96,000 + ₦200,000 = ₦296,000
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Why the answer is B, and why the others tempt you.
Under PITA (as amended), the Consolidated Relief Allowance is computed as the higher of ₦200,000 or 1% of gross income, PLUS 20% of gross income. For gross income of ₦9,600,000: 1% = ₦96,000, which is less than ₦200,000, so the fixed element is ₦200,000. However, the Finance Act 2020 increased the fixed portion to ₦600,000 (higher of ₦600,000 or 1% of gross income). Therefore CRA = ₦600,000 + (20% × ₦9,600,000) = ₦600,000 + ₦1,920,000 = ₦2,520,000. Option A uses the pre-Finance Act 2020 figure of ₦200,000.
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