The Nigerian government provides subsidies for goods and services. One good example is the fuel subsidy. This is paid to petroleum marketers to keep the price of fuel low. But was scrapped by President Ahmed Tinubu. In personal income tax, some form of subsidy is provided. This is referred to as the consolidated relief allowance.
This relief no longer applies since the introduction of the Tax Policy and Acts that were enacted in 2025. Now the government provides the rent relief allowance for individual taxpayers. When computing the pay-as-you-earn tax (PAYE), rent relief is usually deducted. Let us explain the term in detail.
What is rent relief?
This is the relief that is among the deductions allowed from gross emoluments to arrive at chargeable income. It is a relief from the government on the rent paid by the taxpayer.
Rent relief is one of the mechanisms that reduces the tax liability paid by taxable persons. Aside from that, there are allowable deductions such as life assurance premiums, loan interest on owner-occupied buildings, NHIS, NHS, and so on.
Other tax forms of relief provided to individuals are zero percent for the first N800,000. And the tax rate is progressive, allowing lower-income individuals to pay less tax than high-net-worth individuals.
Therefore, when compared with the previous laws on PAYE computation, the tax payable for a certain income level is lower. High-income earners will pay more taxes but it is lower than in the previous tax law compared to the Nigerian Tax Act, 2025.
An individual who owns a home and those staying with others are not entitled to the rent relief allowance. To claim the relief, the taxpayer must show documentary evidence such as a rent receipt from the Landlord.
Sections of the Nigeria Tax Act, 2025 on Rent Relief
The rent relief allowance was introduced in the Nigeria Tax Act, 2025. Section 30 created the relief. While section 30(2vi) explains how it is applied to arrive at chargeable income. It states that rent relief is 20 per cent of annual rent with a maximum of N500,000.
Section 32(1) provides that the relevant tax authority will request documentary evidence in this regard. And if the document is inadequate, the rent relief may be rejected by the tax authority.
What to note when computing rent relief
If an individual pays an annual rent of N250,000, his rent relief is 20% of the amount, that is, N50,000. Also, if an individual's rent is N1,200,000, he or she is entitled to a relief of N240,000.
However, a taxable person with a rent of N3,000,000 cannot get a relief of N600,000 because it is above N500,000. So, he can claim the maximum relief of N500,000.
Another area of note is that the relief is on annual rent. And taxes are applied on the cash basis of accounting. To illustrate, if the individual's first time renting a home is in March 2025, then he can claim 10 months of rent for the year 2025.
He cannot claim the full year because it is his first rent payment. But the payment spans from March 2025 to February 2026 which is above the number of months he can claim for 2205. However, he can claim yearly rent from the 2026 PAYE tax computation.