The Benefits Of Tax Rebate For The Employee

By Oyekola Taiwo Zacharia 

email address: consciousofrisks@yahoo.com; phone no: 07063718460.

The issue of tax rebate is an interesting and very important topic in our society today and this is because of the many benefits associated with it against the prevailing economic and social realities.

But before we go any further on this subject matter today, let us ask the question:

What is a tax rebate, and how is it of importance to us?

A tax rebate simply means a return of money to a taxpayer that generally results in a reduction in the tax liability or tax burden.
It is essentially money paid by the government to individuals or businesses as tax refund.

In the Nigerian context, there are one or two things that anyone seeking to benefit from tax refund should know. For example:

Why Is Life Insurance Policy Needed For Tax Rebate?
The answer is that the Nigerian Tax Law Bill and current tax rates as provided for by law, allow everyone to compare and understand the potential impact of tax on people’s incomes.
Besides, the insurance sector is very critical to economic growth and development because it protects businesses, assets and families. Insurance companies pool large sums of premium, which become crucial for long-term funds for investment for infrastructure development and for other social welfare benefits.

The reality however is that tax relief on premiums paid by an employee is structured in a way to ensure families or individuals are financially stable.
The tax law allows the deduction of premium to promote future financial planning for the family.

How Is Tax Rebate Processed?
The law allows a deduction of the annual amount of any premium paid by an individual to an insurance company on his life or that of his spouse.
This on other words is tax relief on the insurance premium paid during the year proceeding an assessment.

Meanwhile, employees are needed to submit a premium certificate or receipt, which the insurance company would supply annually to the employee to claim the payment.

Benefits Of Tax Rebate Savings
There are many benefits of the tax rebate and some of these are listed below:
1) It is a legal means of collecting from the government now.

2) It is an attractive alternative to the contributory pension scheme at retirement.

3) Tax deduction guarantees an amount of money for the family or dependent upon the death of the breadwinner.

4) Investment in deferred annuity is locked for only at least 5 years with compound interest, after which it could be withdrawn.

5) Accumulating savings could be used to pay children school fees.

What Types Of Life Insurance Products Qualifies For Tax Rebate?

Section 33(3) of the Personal Income Tax Act (PITA) allows a deduction of the annual amount of any premium paid for a contract for a deferred annuity of his own life or that of his/her spouse.

-To be concluded
This is the first part of our continuing series on Tax matters, insurance and retirement.
For further clarifications or your personal investment issues, contact our in-house tax consultant on: 07063718460 or consciousofrisks@yahoo.com