List of Income Exempted From Taxation in Nigeria

 
In Nigeria, not all income is subject to taxation. The tax laws provide certain exemptions to ensure fairness, support specific categories of individuals, and encourage investment in certain sectors. Below is a list of income types that are exempted from tax in Nigeria:

##1. Income Earned by the Government
Income derived by the government itself, including income from government-run activities or operations, is exempt from tax. This includes income earned by the federal, state, and local governments.

.Example: Earnings from government-owned corporations and public institutions.

##2. Agricultural Income
Income derived from agricultural activities is generally exempt from tax. This is done to encourage food production and support the agricultural sector, which is vital for Nigeria's economy.

.Example: Income from farming, fishing, and livestock farming.

##3. Income from Charitable and Religious Organizations
Income earned by registered non-profit organizations, including charities, religious bodies, and institutions engaged in public welfare, is exempt from tax. These organizations must be approved by the relevant tax authorities to qualify for this exemption.

.Example: Donations received by a registered charity or a religious organization.

##4. Pension and Gratuity Payments
Pensions and gratuities received by retirees are exempt from tax. This includes payments made from private or public pension schemes.

.Example: Monthly pension payments to retirees, including any lump-sum retirement benefits.

##5. Scholarships and Grants
Income derived from scholarships or educational grants provided by government bodies, institutions, or recognized organizations is exempt from tax. These grants are intended to support education and skill development.

.Example: Funds received from a government scholarship or educational grant for study purposes.

##6. Capital Gains on Sales of Primary Residence
Capital gains tax is exempt on the sale of a primary residence, provided that the property is owned and occupied by the seller for a minimum period (usually 3 years).

.Example: If you sell your home after living in it for at least 3 years, the capital gains from the sale are tax-exempt.

##7. Dividends from Nigerian Companies
Dividends received from Nigerian companies listed on the Nigerian Stock Exchange (NSE) are exempt from tax. This exemption encourages investment in local companies and the capital markets.

.Example: Shareholders receiving dividends from companies listed on the NSE.

##8. Interest Income from Savings and Investments
Interest earned on savings accounts, bonds, and other investments held in Nigerian financial institutions by individuals is exempt from tax. However, there may be exceptions depending on the amount or source of the interest.

.Example: Interest on personal savings accounts in Nigerian banks.

##9. Income from Small and Medium Enterprises (SMEs)
Certain small businesses and start-ups are eligible for tax exemptions or incentives under Nigerian law, especially if they operate within specific sectors such as agriculture, technology, or manufacturing.

.Example: Income earned by a small business in a rural area or newly established enterprise that qualifies for tax relief.

##10. Income from Cooperatives
Profits or income generated by registered cooperative societies in Nigeria are exempt from tax, encouraging communal self-reliance and economic activities in cooperative structures.

.Example: Profits from a cooperative’s collective farming, savings, or trading activities.

##11. Income from Exported Goods
Income derived from the export of goods and services, particularly from the non-oil sectors like agriculture, is exempt from tax to promote foreign exchange earnings and economic diversification.

.Example: Income from the export of agricultural products like cocoa or rubber.

##12. Life Insurance and Annuities
Life insurance policy benefits, including the death benefit or annuities paid out to beneficiaries of the policyholder, are exempt from income tax in Nigeria.

.Example: Insurance payout received by beneficiaries of a deceased person’s life insurance policy.

##13. Income of Foreign Governments and Diplomatic Missions
Income earned by foreign governments, diplomatic missions, and foreign embassies operating in Nigeria is exempt from tax, as they enjoy diplomatic immunity under international law.

.Example: Income earned by a foreign embassy operating in Nigeria.

##14. Income from Nigerian Sovereign Wealth Fund
Income derived from the Nigerian Sovereign Wealth Fund (SWF) is also exempt from tax, as this fund is used to manage and save the country’s oil revenues for future generations.

.Example: Earnings from investments made through the Sovereign Wealth Fund.


##Wrapping up
In Nigeria, several categories of income are exempted from taxation to encourage social welfare, economic growth, and investment. These exemptions help reduce the tax burden on specific groups, such as retirees, religious bodies, and small businesses, while also supporting key sectors like agriculture, education, and export. Understanding these exemptions can help individuals and organizations make informed decisions regarding their finances and tax obligations.