Lottery, Grants, Gifts and Winnings; Personal Income Tax Under the Nigerian Tax Administration Act 2025

INTRODUCTION

The  constitution of the federal republic of Nigeria in various sections imposes  obligations on the government to provide social infrastructures and amenities necessary for safe and comfortable living conditions for its citizens and development of the country. 

These amenities include electricity, good roads, educational facilities, clean water and environment and institutional development; it is in a bid to achieve these obligations that the government seeks means of generating revenue to fund them. Hence, taxation is a critical component of Nigeria’s economic policy and public finance management. It is one of the primary means for the government to generate revenue, essential for funding public goods and services, redistributing wealth, and managing economic stability.  The tax system is therefore one of the most powerful tools available to any government to stimulate and guide its economic and social development. The ability of a government to raise revenue in order to meet its expenditure is imperative to foster the economic growth of the country. 

With the promulgation of the Nigeria Tax Act scheduled to become operational in January 2026, there is need to discuss the implication of taxes levied on personal income such as winnings from lottery, grant, and gifts by examining the nuances involved.

WINNINGS FROM LOTTERY, GRANTS AND GIFT UNDER THE NIGERIA TAX ADMINISTRATION ACT 2025.

Prior to the promulgation of the new tax Act, the position of winnings from lottery and gift in determining individual personal income tax, has been blurry and subject of debate, many scholars opined that its provided for under the personal income tax Act by inferring from relevant parts of the Act even  though it was not expressly mentioned. 

Taxation of individuals is levied on the income attributed to individuals during a period of time, these taxes are remitted from such income on an annual or monthly basis, which serves as revenue to the government.  Under the Nigeria Tax Administration Act, the total income of an individual for any year of assessment is the taxable income less total deduction, taxable income is the aggregate amount of assessable profits from trade, business, profession or vocation, such as  employment income, income from investing activities, profits or income from any other source, and chargeable gains from the disposal of chargeable assets. the deductions allowed under this Act includes, the amount of a loss incurred by the individual during the year or preceding year of assessment in a trade, business, profession or vocation,the amount of loss incurred on the disposal of a chargeable asset, the individual’s contributions under the National Housing Fund, National Health Insurance Scheme, and contribution under the Pension Reform Act. such deductions must be contained in writing and forwarded to the relevant Tax authority to be vetted before it can be offsetted against the total income of the individual.

The above position is similar to what was obtainable under the repealed personal income tax as it did not expressly mention winnings, grants and gift in the calculation of the total income of individuals but can be inferred from “income from any other source” but the new law went further to make specific provisions for prizes, winnings, honoraria, grants, awards, laurel as chargeable income. Hence, there is no doubt that any income generated from winning a lottery or receiving any grants or gift is taxable under the Nigeria law by January 2026. One may wonder whether winnings from playing Bet9ja Sportybet or prizes for winning a reality TV show like Big Brother Naija are taxable? The answer to the question is in affirmative pursuant to the relevant sections, as such winnings, grants and gifts will be added to any additional income of the individual in calculating the total income of an individual for the year.

COMPARATIVE ANALYSIS ON TAX RATES APPLICABLE TO WINNINGS, GRANTS AND GIFTS UNDER THE NIGERIA TAX ADMINISTRATION ACT AND OTHER JURISDICTIONS

It is clear that income from winning a lottery, grants and gifts are taxable  in Nigeria, the question that begged for answer is at what rates are these incomes taxed, is at a flat rate or progressive rates. For instance in India any winnings from gambling including non-monetary prizes, are taxed as income from “other sources, a flat rate of 30% is applicable on the gross winnings, irrespective of your income tax slab or the amount won. Similarly,  In Ghana, there are two distinctions of gifts under the Internal Revenue Act, Act 592. The first distinction is gifts that could arise out of one’s employment relationship, donated by the employer, an associate of the employer or a third party under an arrangement with the employer or an associate of the employer. The tax payable on gifts from employment is at a graduated rate that is added to the employee’s income and taxed appropriately like PAYE. The second distinction is gifts that do not arise out of one’s employment relationship. In this case, the gift is not taxable where it does not exceed GHS 50.It is only the excess amount that is taxable at a rate of 15%. Also, Ghana has officially scrapped the tax on betting, gaming and lottery winnings as part of a wider shift in Ghana’s fiscal and regulatory stance on the gambling sector.

Under the Nigeria Tax Administration Act, there, is no provision that specified the tax rates to be imposed on winnings from lottery, grants and gifts however it provides that individual personal income tax will be progressive in nature, since grants, gifts and earnings from lotteries are included in the calculations of individual annual income, it will be subject to the progressive tax rate as provided under the new law. If the sum of the total annual income of an individual (including winnings,grants and gifts)  will be calculated using the information below:

S/N	Income Bands	Rate
1	0 – #800,000	0%
2	#800,000 -#3,000,000	15%
3	#3,000,000 – #12,000,000	18%
4	#12,000,000 – #25,000,000	21%
5	#25,000,000 – #50,000,000	23%
6	Over #50,000,000	25%

CONCLUSION

From the foregoing, the innovations brought by the Nigeria tax administration Act is primarily aimed at generating revenue for the governments, which will be used to provide social infrastructures and amenities for its citizenry. In this work, we have discussed the imposition of tax on earnings from winning the lottery, grants and gifts, and compared Nigeria to other countries to show what is obtainable in other jurisdictions around the world. Although this new law is yet to be operational, we hope that its implementations will cover the loopholes in the existing laws it is to repeal.