Since the overtime income is an additional income, Just subtract a fixed sum of N200k from it and multiply the balance by the tax bracket your main income fall into. The bracket can be either 7%,14%,17% 19%, 21% or 24%.

makkosky:
Hi,

Two things,

1. If the overtime is added to your monthly gross salary, it will be tax via Paye tax computation.

2. If the overtime is separately treated as a separate payment, it can pass through

a. A withholding tax calculation of 5% based on contract of service (employee or business name) and

b. Minimum tax of 1% if the over time is not higher than the current minimum wage...

Well, when is time for review by tax authorities, all income will be added as gross income and the tax table will be applied after considering reliefs.

After arriving at the tax payable, all payment will be taken into account and the balance will be paid (with interest and penalty where applicable).

Let accountant do their job

Osyxcel:


Well, when is time for review by tax authorities, all income will be added as gross income and the tax table will be applied after considering reliefs.

After arriving at the tax payable, all payment will be taken into account and the balance will be paid (with interest and penalty where applicable).

The company can decide to separate payroll schedule for other bonus schedules ( performance bonus, over time bonus, Ex gratia bonus, compassionate allowance, out of station allowance etc)... Their is no section of the 2011 PIT act (As amended) that stipulate that all income of employee with be added back to payroll and tax will be calculated on it.

What if the payroll circle is different from the over time circle....

Moreover, on tax Audit, either LIRS or other SBIRS, these people focus more on

1. Directors Paye or DA
2. Paye payment Date
3. Paye computation
4. Business premises
5. Withholding tax schedules (invoices or petty cash)


Most don't even ask if there are OVT or related. Allowances.

makkosky:


The company can decide to separate payroll schedule for other bonus schedules ( performance bonus, over time bonus, Ex gratia bonus, compassionate allowance, out of station allowance etc)... Their is no section of the 2011 PIT act (As amended) that stipulate that all income of employee with be added back to payroll and tax will be calculated on it.

What if the payroll circle is different from the over time circle....

Moreover, on tax Audit, either LIRS or other SBIRS, these people focus more on

1. Directors Paye or DA
2. Paye payment Date
3. Paye computation
4. Business premises
5. Withholding tax schedules (invoices or petty cash)


Most don't even ask if there are OVT or related. Allowances.

Well, according to 2011 PITA (as amendmend), all salaries, bonuses and BIKs are treated as gross emolument.

You're right that the SBIRs don't focus much on some things. It just because our tax systems are not fully effective.

Rubyjade:

I read your analysis and I accessed the sheet but I think according to the finance act. Gross income now includes bonuses, bik, any benefits.so they are not allowable deductions. Pension is deductible tho but others like allowances bonuses are not. Thanks

Osyxcel:


Well, according to 2011 PITA (as amendmend), all salaries, bonuses and BIKs are treated as gross emolument.

You're right that the SBIRs don't focus much on some things. It just because our tax systems are not fully effective.

If state tax audit should go by your first paragraph, a higher percentage of companies might not survive the tax liability. Esp banks.

Good one �

I'm surprised a lot persons are asking what "PAYE" is.

engrzico:
Please accountants, help me out with the current method of taxation for salary earners who work overtime.

Good question

phemmyfour:
PAYE = (Total tax payable – total rebates) / 12

Please explain more. How do you know total tax payable and total rebates?

U calculate the daily pay by dividing the monthly salary by the number of ur working day in the month. For most jobs we do 8 hours daily. Overtime of 1 to 3 hours is considers a half day payment and from 4 hours to 8 hours is considered a full day pay for the number of days of overtime worked.

makkosky:
PAYE Cal for Layman

Gross income - tax relief (Employee pension, NHF, personal life insurance etc) = taxable gross... Then

Taxable gross - CRA (Consolidated Relief Allowance)...= Taxable income.... Then

Taxable income calculation on tax Table (7, 11, 15, 19, 21 & 24% on First 300k, next 300k, next 500k, next 500k, next 1,600m and 3,200m; base on taxable income) = PAYE


Hit me up if you need knowledge about Total compensation and benefits for HR and Accountants, Tax experts etc

08062569822

This is done on the gross and per year, but in the case of you working overtime and it's monthly thing and the overtime rate/payment differ, how is the tax arrived at?

Zihatu:
What is "PAYE"? Do you mean pay?

PAYE - Pay As You Earn

Is a form of taxation by withholding taxes on income payments to employees.

Simple something to run with excel

Pay me make I do am for you

TheDemola:


This is done on the gross and per year, but in the case of you working overtime and it's monthly thing and the overtime rate/payment differ, how is the tax arrived at?

In my opinion, the best way to approach this is to add a percentage (not too high or low) of the overtime earned monthly to the monthly tax payments. Then towards the end of the year, say Nov/Dec, the gross emolument received till date should then be recalculated and adjustments made.

The adjustment could be to increase or reduce the tax to be paid in Nov/Dec.

It is very simple, overtime allowance is part of your gross income and it will be taxed after deducting all allowable deductions.

TheDemola:


This is done on the gross and per year, but in the case of you working overtime and it's monthly thing and the overtime rate/payment differ, how is the tax arrived at?

It can be calculated monthly. On your second line, it can be 1% if it's not more than minimum wage, it can be 5% on amount earned ( WHT scenario) or be added back to staff monthly gross pay and be subjected to PAYE computation.

I need to know more about this tax issues I want to know what percent they're charged on 100k as gross .

I work in a manufacturing company in Ogun state.
Anuall income before tax of 2.5m

spydera:

There are factors that could affect the variables involved in taxation such as this:
Your place of work;
Is it a private or government institution?
If it is government, is it state or federal? Snd in what state?
Salaries are earned according to levels (ranks)...
Each of these levels have a percentage of fixed income to be deducted as tax from the total gross income.

laughitall:
What’s paye?

PAYE means Pay As You Earn

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makkosky:


It can be calculated monthly. On your second line, it can be 1% if it's not more than minimum wage, it can be 5% on amount earned ( WHT scenario) or be added back to staff monthly gross pay and be subjected to PAYE computation.

There is no need of making it a percentage. Its best added to the gross income.

Over time is not withholdable. Except if you want to call it services and specify which. And in this case if it's added to the PAYE calculation, it doesn't affect it because it has been taxed as WHT.

From the regulatory point of view, overtime should be added as an earned income.

makkosky:


It can be calculated monthly. On your second line, it can be 1% if it's not more than minimum wage, it can be 5% on amount earned ( WHT scenario) or be added back to staff monthly gross pay and be subjected to PAYE computation.

There is no need of making it a percentage. Its best added to the gross income.

Over time is not withholdable. Except if you want to call it services and specify which. And in this case if it's added to the PAYE calculation, it doesn't affect it because it has been taxed as WHT.

From the regulatory point of view, overtime should be added as an earned income

Sulybayus:
I need to know more about this tax issues I want to know what percent they're charged on 100k as gross .

Its simple to calculate but depends on some other factors. Do you pay NHIS, Pension, NHF? These are deductibles

engrzico:
I work in a manufacturing company in Ogun state.
Anuall income before tax of 2.5m

Is NHF, pension, NHIS paid for you?

engrzico:
I work in a manufacturing company in Ogun state.
Anuall income before tax of 2.5m

I helped a HR with PAYE computation. However there's been a little change from 2020 financial act.

The old method of computation is as below:

laughitall:
What’s paye?

that's pay as you earn.... paye

makkosky:


It can be calculated monthly. On your second line, it can be 1% if it's not more than minimum wage, it can be 5% on amount earned ( WHT scenario) or be added back to staff monthly gross pay and be subjected to PAYE computation.

This PAYE computation

Taxable income calculation on tax Table (7, 11, 15, 19, 21 & 24% on First 300k, next 300k, next 500k, next 500k, next 1,600m and 3,200m; base on taxable income)

to me, needs to be reworked and to me, I feel one can be overtaxed. With this table and knowing your gross pay, you can easily know how much is your monthly tax, but overtime pay monthly differ and then there are other payments, like leave bonus, child allowance and all (which are paid once/year), it is difficult to actually know how you are being taxed. Except this graduated tax pay has a way of it being done monthly too

mrphysics:

I helped a HR with PAYE computation. However there's been a little change from 2020 financial act.

The old method of computation is as below:

What's now the new method please?

TheDemola:


This PAYE computation to me, needs to be reworked and to me, I feel one can be overtaxed. With this table and knowing your gross pay, you can easily know how much is your monthly tax, but overtime pay monthly differ and then there are other payments, like leave bonus, child allowance and all (which are paid once/year), it is difficult to actually know how you are being taxed. Except this graduated tax pay has a way of it being done monthly too

To calculate the graduated tax table monthly, divide the GTT stages amount by 12....
That's 1st 300k/12 * 7%...