By Babajide Komolafe
Musa’s phone buzzed just as he was settling down after dinner. “N250,000 CREDIT ALERT.” He smiled. It was money his elder sister in Ibadan had sent to support their mother’s hospital bills.
But almost immediately, another thought crept in. “Wait o… with all this new tax law wahala, will this money be taxed?” If Musa feels confused, he’s not alone.
Many Nigerians are now worried that any money entering their bank account automatically means tax. But that’s not how tax works — and the new tax laws make this clearer than ever. Let me tell you what Musa learned.
Not All Money Is Income The first thing Musa discovered is a simple rule: Tax is not about money entering your account. It’s about what that money actually is. In other words, not every credit alert is income, and only income is taxed.
This is where many people get into trouble — not because they are doing anything wrong, but because they describe money wrongly.
The Description Matters More Than the Alert A few days later, Musa checked his bank statement and noticed something interesting. Each credit had a description. That’s when it clicked.
If money looks like income, the system may treat it like income — even when it isn’t. But when money is correctly described, you only pay tax where tax is truly required. Let’s walk through the kinds of money Musa receives — just like most Nigerians.
Family Support Is Not Income That N250,000 from Musa’s sister? It was family support. As long as it is truly a gift or family assistance, it is not taxable. Money sent to help parents, siblings, or relatives does not suddenly become income just because it entered a bank account.
Correct description: “Gift” or “Family support” Tax: None Refunds and Reimbursements Are Not Income Another day, Musa’s office refunded him money he had spent on transport during a work trip. That money wasn’t profit.
It wasn’t a salary. It was his own money coming back to him. Correct description: “Refund” or “Reimbursement” Tax: None
Moving Your Own Money Is Still Your Money Musa sometimes transfers money from his savings account to his current account. Sometimes he sends money to himself using different banks. That doesn’t create income.
Correct description: “Personal transfer” or “Savings” Tax: None Loans Are Not Income When Musa borrowed money from a cooperative to fix his car, that money also came as a credit alert. But borrowing does not make you richer — you must pay it back. Correct description: “Loan received” Tax: None
Business Capital Is Not Business Income Musa’s cousin runs a small printing business. When she added her own money to the business to buy new equipment, that money entered the business account. But that wasn’t a profit. It was the capital. Correct description: “Capital contribution” Tax: None
Why This Matters Under the New Tax Laws What the new tax laws emphasize is accuracy and transparency. They are not saying: “Every credit alert must be taxed.” They are saying: “Money should be described honestly and correctly.”
If you wrongly label money in a way that makes it look like income, you may end up paying more tax than you should.
One Important Warning
All these descriptions are tax-free only when they are true.
Calling income a “gift” when it is actually payment for work is illegal and can lead to penalties. The law protects honest taxpayers — not false descriptions.
The Lesson Musa Learned
That night, Musa relaxed. He hadn’t done anything wrong. His money was clean, legal, and properly described.
The new tax laws didn’t come to punish him. They came to make one thing clear:
Always describe your money accurately and legally. That way, you pay only the tax you truly owe — and nothing more. And really, that’s something every Nigerian can agree with.
