January 29, 2022

SB-Accounting

Accounting + Finance Blog

Meaning Vocation in Personal Income Tax (PITA)

Meaning Vocation in Personal Income Tax (PITA)
Shares

Vocation is another aspect of personal income tax. It is considered when deciding what basis taxes will be charged. An individual trader is involved in a vocation and is assessed to tax on a previous year basis. This is different from persons under a contract of employment charged under a current year basis using PAYE. Let’s discuss this!

Definition of Vocation

Vocation is any trade a person has knowledge on or he or she is suited, trained, or qualified. It can be an activity a person earned income from daily or what he or she uses to pass time. Someone in a vocation may learn the trade from another person who has the knowledge and practices it.

Key Explanations

A trade. A vocation is a trade. Such trade is done by the individual in a store. Most trades are owned and managed by an individual. In Nigeria, the trader sells on the street, market place or other busy locations. A trade might also be services rendered by an individual.

READ ON  Tax Due dates for Business in Nigeria 2022

Knowledge of. For vocations, the individual does not need a formal education to know of it. It might be knowledge passed from parent to child. Or learned from a neighbor. Some people naturally possess the skills needed to trade and may require someone with experience to finalize the training. For example, a person might be good at painting naturally. But he or she needs another person with experience to acquire the complete knowledge of the job.

Training. A person that doesn’t possess the skill may get training from a specialist. Upon qualifying, the trainee is issued a certificate. This is called “freedom” in Nigeria. After which the trainee can establish his or her business. For example, an individual may learn repairs of motor vehicles, usually called mechanics. On completion of such training, he or she can start a personal business where he repairs vehicles.

A source of Income. Vocation serves as a source of income to the trader. He or she may earn income daily. Such a person is under the contract for employment and his or her income is assessed to tax on a preceding year basis. He is also expected to pay withholding tax on income at source if he or she has a contract from another business. Next, the company is expected to charge withholding tax at the source. And pays the net amount to the trader.

READ ON  Meaning of Tax Yield and Key Explanations

A person who has vocational knowledge may not use it to earn income. He or she might use the knowledge to pass time. Or to help other people. Someone who knows how to repair a television may not use that knowledge to earn income but uses it to repair his television or a friend’s just to pass time.

Conclusion

A vocation is a trade an individual may acquire with or without training. Such knowledge may be used to earn income or to pass time. When used to earn income, the individual is charged tax on a preceding year basis. Also, he will pay withholding tax at source when performing services to other companies.

Shares