Skip to main content

PAYE Management

The PAYE (Pay As You Earn) calculator helps you calculate employee income tax in compliance with Nigerian tax regulations. Access it at https://accounting.digit-tally.io/paye.

[SCREENSHOT: PAYE calculator interface at accounting.digit-tally.io/paye]

What is PAYE?​

PAYE is the income tax deducted from employees' salaries by employers on behalf of the Federal Inland Revenue Service (FIRS) and State Internal Revenue Services.

Key Benefits​

  • Automated Tax Calculation - Calculate PAYE based on current Nigerian tax rates
  • Compliance - Ensure accurate tax deductions in line with FIRS regulations
  • Relief Management - Apply consolidated relief allowances automatically
  • Integration - Works seamlessly with payslip generation

How to Calculate PAYE​

Step 1: Access the PAYE Calculator​

  1. Log in to your Digit Tally account
  2. Navigate to the Accounting app
  3. Go to https://accounting.digit-tally.io/paye or find it in the dashboard

[SCREENSHOT: Navigation to PAYE calculator]

Step 2: Enter Employee Information​

The PAYE calculator requires:

FieldDescriptionExample
Gross SalaryTotal monthly salary before deductionsNGN 500,000
Pension ContributionEmployee's pension contribution (8% of basic salary)NGN 40,000
NHF ContributionNational Housing Fund contribution (2.5% of basic salary)NGN 12,500
Other AllowancesNon-taxable allowancesNGN 50,000

[SCREENSHOT: PAYE calculator input form with sample data]

Step 3: Calculate PAYE​

  1. Fill in all required fields
  2. Click Calculate PAYE
  3. Review the calculated tax amount
  4. The system automatically applies consolidated relief allowance

[SCREENSHOT: PAYE calculation result showing breakdown]

Step 4: Review Tax Breakdown​

The calculator displays:

  • Taxable Income - Gross income minus allowable deductions
  • Consolidated Relief Allowance - Automatically applied (higher of NGN 200,000 or 1% of gross income + 20% of gross income)
  • PAYE Amount - Final tax to deduct from employee salary
  • Net Salary - Take-home pay after PAYE deduction

[SCREENSHOT: Detailed PAYE breakdown showing all components]

Nigerian PAYE Tax Rates (2024)​

Digit Tally uses the current FIRS tax bands:

Annual Taxable IncomeTax Rate
First NGN 300,0007%
Next NGN 300,00011%
Next NGN 500,00015%
Next NGN 500,00019%
Next NGN 1,600,00021%
Above NGN 3,200,00024%

Consolidated Relief Allowance​

The higher of:

  • NGN 200,000 plus 20% of gross income, OR
  • 1% of gross income

This is automatically applied by the calculator.

Understanding PAYE Components​

Taxable Income​

What's Included:

  • Basic salary
  • Housing allowance
  • Transport allowance
  • Other cash allowances
  • Benefits in kind (where applicable)

What's Excluded:

  • Pension contributions (up to 8% of basic salary)
  • NHF contributions (2.5% of basic salary)
  • Consolidated relief allowance
  • Gratuities (under certain conditions)
  • Life insurance premiums (up to certain limits)

Monthly vs Annual Calculation​

The PAYE calculator can work on:

  • Monthly basis - For regular payroll processing
  • Annual basis - For tax planning and year-end calculations

Common PAYE Scenarios​

Scenario 1: Standard Employee​

Employee Details:

  • Gross Monthly Salary: NGN 500,000
  • Pension (8%): NGN 40,000
  • NHF (2.5%): NGN 12,500

Calculation:

  1. Gross Income: NGN 500,000
  2. Less Pension: (NGN 40,000)
  3. Less NHF: (NGN 12,500)
  4. Taxable Income: NGN 447,500
  5. Annual Taxable: NGN 5,370,000
  6. Less Relief: (NGN 300,000) [20% × 500k + 200k]
  7. Net Taxable: NGN 5,070,000
  8. Monthly PAYE: Approx. NGN 88,125

[SCREENSHOT: PAYE calculation for standard employee scenario]

Scenario 2: High Earner​

Employee Details:

  • Gross Monthly Salary: NGN 2,000,000
  • Pension (8%): NGN 160,000
  • NHF (2.5%): NGN 50,000

Calculation:

  1. Higher tax bands apply (21-24%)
  2. Larger relief allowance applies
  3. Monthly PAYE: Approx. NGN 425,000

Scenario 3: Entry-Level Employee​

Employee Details:

  • Gross Monthly Salary: NGN 150,000
  • Pension (8%): NGN 12,000
  • NHF (2.5%): NGN 3,750

Calculation:

  1. May fall within first tax band (7%)
  2. Relief allowance may reduce PAYE significantly
  3. Monthly PAYE: Approx. NGN 5,250

PAYE Compliance Tips​

Best Practices

Do's:

  • Calculate PAYE monthly before generating payslips
  • Keep records of all PAYE calculations for at least 6 years
  • Remit PAYE to tax authorities within 10 days of the month following deduction
  • File annual returns even if no PAYE was deducted
  • Update employee tax information annually

Don'ts:

  • Don't forget to apply consolidated relief allowance
  • Don't include exempt allowances in taxable income
  • Don't delay PAYE remittance (penalties apply)
  • Don't use outdated tax rates

Filing PAYE Returns​

While Digit Tally calculates PAYE, you must file returns with:

Federal Inland Revenue Service (FIRS)​

  • Monthly Remittance - Within 10 days of the following month
  • Annual Returns - By January 31st of the following year
  • Format - Use FIRS online portal or approved software

State Internal Revenue​

  • Monthly Remittance - For state-based employees
  • Annual Returns - As required by state regulations

[SCREENSHOT: PAYE summary report for filing]

Exporting PAYE Data​

You can export PAYE calculations for:

  1. Filing with Tax Authorities - CSV/Excel format
  2. Accounting Records - Integration with journal entries
  3. Employee Records - Individual PAYE statements
  4. Audit Trail - Complete calculation history

Integration with Payslips​

PAYE calculations automatically integrate with the Payslip app:

  1. Calculate PAYE in Accounting app
  2. PAYE amount flows to Payslip generation
  3. Employee payslips show detailed PAYE breakdown
  4. Maintains consistency across all records

Learn more: Generate Payslips

Troubleshooting PAYE Issues​

Issue: PAYE Seems Too High​

Check:

  • Is pension contribution correctly entered?
  • Is NHF contribution included?
  • Are non-taxable allowances properly excluded?
  • Is consolidated relief being applied?

Issue: PAYE Seems Too Low​

Check:

  • Is gross salary correctly entered?
  • Are all taxable allowances included?
  • Are you using current tax rates?

Issue: Calculator Not Applying Relief​

Solution:

  • Refresh the page and try again
  • Ensure all required fields are filled
  • Check that gross salary is entered correctly
  • Contact support if issue persists

Frequently Asked Questions​

What is the minimum salary for PAYE?​

PAYE applies to all employees, but those earning below the first tax band after deductions may have zero PAYE due to relief allowance.

How often should I calculate PAYE?​

Calculate PAYE monthly for each employee before generating payslips.

Can I calculate PAYE for multiple employees at once?​

Currently, PAYE is calculated individually. For bulk processing, integrate with the Payslip app.

What if an employee joins mid-month?​

Calculate PAYE based on their actual earnings for that month.

Do I need to file PAYE if no tax was deducted?​

Yes, you must still file returns showing zero PAYE deductions.

Need Help?​

Support

For questions about PAYE calculations or compliance:

  • Email: support@digit-tally.io
  • Consult with your tax advisor for specific tax situations
  • Refer to FIRS guidelines for latest regulations

What's Next?​

Last updated on