- 30 Marks
Question
Damilola Adewunmi is the Human Resources Manager of Mighty Steel Nigeria Limited. He is married and blessed with three children.
- The following details relate to Damilola Adewunmi for the year ended December 31, 2015:
| Item | Amount (N) |
|---|---|
| Salary | 3,144,000 |
| Commission | 525,000 |
| Rent received | 1,350,000 |
| Gain from sale of shares | 300,000 |
| Pension received from employment | 450,000 |
| Benefits-in-kind (all assessable) | 225,000 |
| Interest on Fixed Deposit (gross) | 180,000 |
- Damilola contributes N22,500 monthly towards the upkeep of his aged mother. His elder brother, Adekunle, also contributes N37,500 monthly.
- Damilola took an insurance policy on his life and pays a premium of N15,000 monthly.
- The children are University undergraduates and enjoy a scholarship for only tuition from his State Government.
- Damilola took a loan to build an owner-occupied house on which he pays N90,000 annual interest.
- For an outstanding performance, he was given an end-of-year bonus in the sum of N90,000.
- Withholding Tax of N18,000 was deducted in respect of interest on Fixed Deposit.
Required:
a. Calculate the income tax payable for the relevant year of assessment.
b. Calculate the income tax payable for the relevant year of assessment, assuming 2015 is the year of assessment with the following additional information:
- Contribution to National Housing Fund: N78,600
- Contribution to National Health Insurance Scheme: N210,000
- Contribution to Pension Scheme: N235,800
c. Explain briefly the following:
- Itinerant worker
- Non-resident individual
- Earned income
- Resident individual
- Unearned income
d. List FIVE dividends exempted from tax.
Answer
c. Brief Explanations of Terms
- Itinerant Worker: An individual who moves from place to place in the course of employment, often subject to specific tax implications based on duration of stay in any particular jurisdiction.
- Non-Resident Individual: A person who does not meet residency criteria within the tax jurisdiction and is typically taxed only on income derived from or remitted to the country.
- Earned Income: Income derived from active work, such as salaries, wages, or business income, as opposed to passive income sources.
- Resident Individual: A person who resides in a country for a specified period, making them subject to tax on their global income.
- Unearned Income: Income obtained from passive sources, such as interest, dividends, or rental income, rather than active work.
d. Dividends Exempted from Tax
- Dividends paid by a unit trust.
- Dividends received by a person from a company incorporated in Nigeria after the tax has been fully paid.
- Dividends derived by a Nigerian company from investments in other Nigerian companies.
- Dividends from small companies in the manufacturing sector within the first five years of operation.
- Dividends received from investments in foreign companies.
- Tags: Income Tax, Personal Income Calculation, PIT, Tax deductions
- Level: Level 2
- Topic: Personal Income Tax
- Series: MAY 2017
- Uploader: Theophilus