Since the new Tax Act took effect this year, a rumour has been making the rounds. That if you don’t write “gift” in the narration of a bank transfer, the government can tax the money, but if you tag it as a gift, you’re safe.
This rumour is not true!!
There is no provision in the new Tax Act that taxes people simply because of how they describe a bank transfer. Tax authorities do not sit and read transfer narrations to decide who to tax. So, whether you write “gift”, “family support”, “payment”, or leave the narration blank, that alone does not make the money taxable.
HERE’S HOW THE SYSTEM ACTUALLY WORKS
1️ Not every bank transfer is taxable: Tax is charged on income, i.e, salaries, business profits, professional fees, and similar earnings. Moving money from one account to another is not automatically income.
2️ Gifts and personal transfers are not income: Money received as a genuine gift or family support is generally not treated as taxable income, provided it is not payment for services or business transactions.
3️ No automatic tax deductions from transfers: The government does not automatically remove income tax from personal bank transfers. There is currently no system where taxes are deducted just because money entered your account.
4️ The only automatic bank charge most people see, that ₦50 often deducted on some transfers, is stamp duty, not income tax. It applies to certain electronic transfers and has nothing to do with whether the money is a gift or not.
So do you need to write “gift” in your narration? No!
However, using the proper narration makes it easier to explain your income or transactions if you ever file tax returns or are asked.
In essence, your narration does not magically create or erase a tax obligation.
Have you also heard this rumour?
What other tax questions would you like broken down simply?
#Nigeria #TaxLaw #LegalSimplified #FinancialLiteracy #PolicyExplained