Money entering a bank account is not automatically taxed under Nigeria’s new tax law, according to an economic analyst, who clarified that only income, not every inflow, is subject to tax.
The clarification was made during a recent X Space discussion on how the new tax framework affects salaries, businesses and everyday spending, following growing public anxiety since the law took effect on January 1, 2026.
The analyst explained that the tax system is designed to tax income earned, not funds merely received. Inflows become taxable only when they qualify as income under the law, stressing that proper tax filing is now the most important legal protection for individuals and small businesses.
He noted that income broadly covers earnings such as salaries, business profits, interest, digital earnings and other gains, particularly for individuals and small and medium-sized enterprises. However, not all money received falls into this category.
According to him, certain inflows are clearly excluded from taxable income, including gifts, inheritance, loans and life insurance payouts. Borrowed funds, for instance, do not count as income because they come with a repayment obligation, while gifts, regardless of size, do not create tax liability for the recipient.
He warned that the major risk under the new tax regime is not receiving money but failing to file tax returns. Under the revised framework, automatic tax reliefs that previously applied to taxpayers have been removed, shifting responsibility fully to individuals and businesses to declare income and claim exemptions themselves.
In the past, taxpayers benefited from automatic reliefs, including a percentage-based allowance and a fixed deduction, even without filing returns. Those provisions no longer apply. Failure to file now exposes taxpayers to the risk that inflows could be assumed to be income by tax authorities.
On concerns about bank monitoring, he said tax authorities may have visibility over bank inflows, but this does not translate into automatic taxation or direct deductions. Filing tax returns gives taxpayers the opportunity to explain the source of funds and clarify what qualifies as income. Without filing, tax authorities may treat unexplained inflows as taxable income.
He also dismissed fears that the government can withdraw money directly from bank accounts without due process, stating that enforcement actions require legal procedures, including court orders where applicable.
Summing up the reforms, he said the new tax law does not introduce new personal taxes but focuses on stricter compliance by removing automatic reliefs and relying more heavily on accurate self-reporting. For individuals and MSMEs, filing tax returns is now the key safeguard against wrongful taxation.
Separately, a tax expert at a leading professional services firm recently urged finance teams and businesses to urgently automate compliance processes, warning that the new tax regime carries significant penalties for errors that can no longer be safely handled through manual systems.
