Economic analyst Kalu Aja has moved to clear widespread misconceptions surrounding Nigeria’s new tax laws, stating unequivocally that money entering a bank account is not automatically subject to tax. According to him, what the law targets is income, not every inflow recorded in an individual’s or business’s bank account.
Aja made this clarification while speaking during an X Space hosted by Nairametrics on Thursday. The session, themed “How the new tax law affects your pay, business and daily spending,” focused on addressing public anxiety following the implementation of Nigeria’s revised tax framework, which officially took effect on January 1, 2026.
His comments come amid growing fears among individuals, freelancers, and small business owners that bank deposits—regardless of source—could now be taxed directly by authorities. Aja described this belief as inaccurate and stressed that misunderstanding the reforms could cause unnecessary panic.
Only income, not inflows, attracts tax
Explaining the core principle behind the reforms, Aja said the tax system has not changed its fundamental definition of what is taxable. What has changed, he noted, is the enforcement structure and the responsibility placed on taxpayers.
“People are worried that once money enters your account, tax will be deducted. That is not how the law works,” he said. “If money comes into your account as income, then it is taxable. If it is not income, it is not taxable.”
He explained that income broadly covers salaries and wages, business profits, professional fees, interest, digital earnings, and other gains arising from economic activity. This definition applies to employees, entrepreneurs, freelancers, and small and medium-sized enterprises (SMEs).
In his words, “Literally, any income you make as a taxpayer—whether from work, business, or investments—is taxable. But the key word here is income.”
What does not count as taxable income
Aja was emphatic that several common inflows are explicitly excluded from taxable income under the law. These include:
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Gifts
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Inheritance
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Loans
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Life insurance payouts
Using a practical example, he explained that borrowed funds cannot be taxed because they are liabilities, not earnings. “If I take a loan from a bank and the money enters my account, that is not income. I owe it back, so it is not taxable,” he said.
Similarly, gifts—no matter how large—do not attract income tax. “If someone sends me money as a gift, it is not income to me, and I will not include it as taxable income,” Aja added.
Why tax filing now matters more than ever
According to Aja, the real risk under the new tax regime is not receiving money, but failing to file tax returns properly. He explained that the revised framework removes automatic reliefs that previously applied to taxpayers, shifting responsibility squarely onto individuals and businesses.
Under the old system, taxpayers benefited from a fixed 20% relief plus ₦200,000 automatically, even if they did not actively file returns. That structure, Aja said, no longer exists.
“They’ve changed the structure,” he explained. “Now, the onus is on you to file and claim exemptions. If you don’t, you expose that income to taxation.”
Filing tax returns, he noted, is what creates a legal record explaining the source and nature of funds entering a taxpayer’s account.
How tax authorities view bank data
Addressing concerns about surveillance, Aja clarified that while tax authorities may have visibility into bank inflows, they cannot tax those inflows automatically.
“They don’t tax inflow. They tax income,” he said. “When you file, you give context to the money that came into your account. That’s when the tax authority can either accept your filing or challenge it.”
However, he warned that failing to file leaves room for assumptions. “If you don’t file, the tax man may see money coming in and assume it is income, then ask you to pay tax on it,” he cautioned.
No automatic deductions without due process
Aja also dismissed fears that tax authorities could arbitrarily debit bank accounts under the new law. According to him, enforcement actions still require due process.
“They cannot enter your account and take money just because they think you owe tax,” he said. “Even after filing, they would still need legal backing, including a court order, before any enforcement.”
Key takeaway for taxpayers
Summing up, Aja stressed that the new tax laws do not introduce fresh personal taxes but instead tighten compliance by removing automatic reliefs and relying more heavily on accurate self-reporting.
“Anything that comes into your account, apart from gifts, inheritance, insurance payouts, and loans, is income. Filing your taxes is what protects you,” he concluded.
What you should know
Earlier in the week, tax expert Kenneth Erikume, a Partner at PwC Nigeria, urged businesses and finance teams to urgently automate compliance processes to avoid penalties under the new tax regime. Speaking at FirstBank of Nigeria’s Nigeria Economic Outlook 2026, he warned that the revised tax laws impose stricter sanctions for errors, making manual processes increasingly risky.
Emmanuel Bassey is a Financial Expert that has worked in the Banking and Finance Industry for over 15+ years across different banks in Nigeria
