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PAYE Payroll Calculation for Nigeria using Formula

First, determine your taxable income and using the Nigerian tax bracket system, define the taxes that apply to each bracket.

Assuming taxable income = TI
Assuming Annual Gross = AG
Tax Payable one
Condition: TI <= 0
Formula: AG *0.01

Tax Payable 7
Condition: TI > 3200000
Formula: 560000+(0.24*(TI-3200000))

560000 being tax payable up to this point.

Tax Payable one is calculated on AG because according to Nigerian Tax Law, if taxable income is less than or equal to 0, a flat rate of 1% is taxable on gross income.

EARNING

DEDUCTION

Taxable income= CI
ANNUAL Gross= AG

Tax Payable one
Condition: CI <= 0
Formula: AG *0.01

Tax Payable TWO
Condition: CI <= 300000
Formula: CI*.07

Tax Payable THREE
Condition: CI <= 600000
Formula: 21000+(.11*(TI-300000))

Tax Payable FOUR
Condition: CI <= 1100000
Formula: 54000+(.15*(TI-600000))

Tax Payable FIVE
Condition: CI <= 1600000
Formula: 129000+(.19*(TI-1100000))

Tax Payable SIX
Condition: CI <= 3200000
Formula: 224000+(.21*(TI-1600000))

Tax Payable SEVEN
Condition: CI > 3200000
Formula: 560000+(.24*(TI-3200000))

pension fund

SLIP ONE

SLIP TWO

still didnt get the right deduction
I Noticed PENSION FUND is not visible on the slip

Almost there but missing something in condition. To determine the band your condition from Tax Payable 2 upwards must identify the tax bracket otherwise it will calculate payable tax wrongly. so for instance:

Tax Payable 2 Condition: (first N300,000)
CI > 0 and CI <= 300000

Tax Payable 3 Condition: (Next N300,000)
CI > 300000 and TI <= 600000

Tax Payable 4 Condition: (Next N500,000)
CI > 600000 and CI <= 1100000

and so on until you get to Tax Payable 7 which determines the tax payable if next salary band is is in excess of N3,200,000.

Up until this point I assume these tax components are created as statistical components so they will not show up in your totals. you need to create a pension component which will show on your payslip and use it to calculate your pension deduction. But you created a pension component and made it statistical in earning so it will not act as a deduction. Move to deduction section to give it effect.

on the earning i created Pension P as statistical component
I gave it effect in deduction as pension fund (PF) this time its not a statistical component but it is calculated from P






inserted the conditions but didnt get any deduction on the slip

Okay so I’m just going to dump mine here so you can compare with yours to see what could be different.

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i really must appreciate your effort and time in helping me out, trust me i sincerly do but as at this hour, i have compared both with mine yet i dont know why my results are different :sob:. Does it have anything to do with the unticked check box on each salary component or version or anything ?

Hi @Chibuzor_Derrick, If you are still having issues replicating @flexy2ky suggestions then I suggest you take a step back and ensure the salary components are of the correct types, Generally,

  1. Employer Contribution (10% of Basic, Housing, Transport) should be tagged as “do not add to total” with its values not contributing to the total deductions.

  2. Consolidated Relief Allowance, Taxable Income, Additional Tax Relief, All Tax Payable Slabs should be Statistical components, so they can be calculated alone.

  3. Employee Contribution (8% of Basic, Housing, Transport), PAYE (Income Tax) should be normal deductions with their values contributing to the total deductions.

One way to easily identify the source of the issue would be to change them all to generic components so that they can be seen on the salary slip so as to see where the calculations break.

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@Ebuka_Joseph_Akeru

Earning : all statistical component are unticked to “dont add on total” and the rest are ticked “depend on payment days”

Deduction: all statistical component where ticked and the rest are “depend on payment days”

i can categorically say that the calculation is correct using the snip_shots from @flexy2ky as shown above

by the time i ticked statistical component for (annual gross,pension,cra,taxfree income, chargable income) in the earning. i get this

Move them to deduction section

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this solves it

thanks

@Ebuka_Joseph_Akeru @flexy2ky

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