In Ghana, the Income Tax Act of 2015 (Act 896), with subsequent amendments, levies taxes on individuals who earn income during the Assessment Year, unless they are granted specific exemptions under the law. For individuals and partnership-based earners, their Assessment Year aligns with the government’s calendar year, running from January 1st to December 31st. This means that all income earners within the defined categories are mandated to register with the Ghana Revenue Authority, submit their tax returns, and fulfill their tax obligations.
Resident individuals who pay taxes are entitled to personal tax reliefs, which act as incentives to reduce their tax liabilities. Unfortunately, many individuals remain unaware of these reliefs as they navigate Ghana’s income tax landscape. The law stipulates that tax returns must be filed, and individuals can claim these reliefs. Some of these reliefs can even be claimed on a monthly basis, particularly for those whose income is exclusively from employment.
Understanding Personal Tax Reliefs
Personal tax reliefs are government-approved allowances aimed at decreasing an individual’s taxable income, thereby lightening the tax load. They are designed to ease the tax burden on individuals, taking into account their unique circumstances. For instance, a married individual with school-going children typically has more financial responsibilities than a single person. Consequently, resident individuals can deduct these personal tax reliefs from their assessable income for the year.
To apply for these reliefs, a resident individual must complete a prescribed form and submit it to the Commissioner-General. The relief amount is determined based on the individual’s personal situation as stated on the application form. Application forms are readily available at the Domestic Tax Revenue Division offices of the Ghana Revenue Authority across the country.
Types of Personal Tax Reliefs
Here are the various personal tax reliefs available to Ghana’s residents, along with their corresponding relief amounts:
- Marriage/Responsibility Relief: This relief is granted to resident individuals who support their spouse or at least two dependent children. The relief is fixed at GH¢1,200 per year and is given to only one spouse in a marriage upon submission of a marriage certificate or certified copy of the marriage registration.
- Disability Relief: This relief benefits individuals who can prove to the Commissioner-General that they are disabled. It applies to disabled individuals who earn income from business or employment, with a relief amount equivalent to 25% of their income from business or employment. Income from investments is excluded from this relief.
- Aged Relief: Individuals who are sixty (60) years of age or older can claim this relief, which amounts to GH¢1,500 per year. To qualify, the individual must derive assessable income during the year from employment or business, excluding income from investments. Proof of the individual’s date of birth is required.
- Child Education Relief: This relief is available to resident individuals who pay school fees for their children. An individual sponsoring a child’s education in a recognized registered educational institution in Ghana is entitled to a personal relief of GH₵600 per child, up to a maximum of three children. The Commissioner-General will grant only one relief if multiple individuals qualify for the same child. It’s essential to provide evidence of funding the education of these children and confirmation that they are studying in the said educational institution.
- Aged Dependent Relief: This relief is granted to resident individuals who care for a relative aged sixty (60) and above. The relief is GH¢1,000 per year and is applicable for up to two relatives. This relief does not extend to a dependent’s spouse or child.
- Professional, Technical or Vocational Training Relief: If a resident individual undergoes training to enhance their professional, technical, or vocational skills, they can claim this relief. It’s equivalent to the cost of training, not exceeding GH¢2,000 per year. Evidential documentation of the training is required for this claim.
- Mortgage Relief: This relief applies to the amount of qualifying mortgage interest paid in a given tax year for an individual’s principal private residence. It’s essential to note that this relief can be enjoyed for only one building.
How to Apply for These Reliefs
To apply for these tax reliefs, individuals can obtain the prescribed forms from the Domestic Tax Revenue Division offices of the Ghana Revenue Authority across the country. The application form should be submitted to the Commissioner-General.
In conclusion, personal tax reliefs in Ghana are vital allowances that reduce an individual’s taxable income, making it easier to meet their tax obligations. Some of these reliefs can be claimed upfront if the income is solely from employment, while others are claimable upon filing tax returns. It is advisable for all resident individuals to seize the opportunity to take advantage of these reliefs and file their annual tax returns to benefit from these tax-saving measures.