Are bank transfer descriptions that important? Experts don't think so

In 22 days, Nigerians will enter a new fiscal reality that will prompt them to distinguish between taxable and non-taxable income received.

Contents

What tax experts have to say

The way forward: Tax compliance beyond descriptions

With mobile transfers now being a major way of moving money, there is an urgency for every income earner to understand the distinction between taxable and non-taxable inflows and maintain robust documentation to avoid being classified as tax-evading or having non-income transfers wrongly assessed.

This has resulted in several public debates, which made a simple tweet go viral on the popular X platform. The social media post noted the importance of including a description to every mobile money transfer made starting from next year. While many people understood what that meant, others didn’t.

Most Nigerians are anxious and eager to understand how the new system will determine what counts as taxable income, how tax authorities will track inflows, and whether everyday transactions will suddenly raise questions.

In this article, tax experts explain how the new tax regime scrutinises digital transactions, clarify the difference between taxable and non-taxable income, and offer practical advice on whether the viral emphasis on transfer descriptions holds up under the rigorous requirements in 2026.

What tax experts have to say

Taiwo Micheal, a Senior Tax Consultant, highlighted that bank descriptions on electronic transfers are useful for taxpayers when preparing their filings. They help individuals recall the purpose of each transaction when gathering documents for personal income tax, but are not entirely the only method for compliance.

“Bank descriptions on every electronic payment transfer would help taxpayers know the purpose of their transactions when gathering documents for filing a personal income tax. The tax officers won’t request the transaction receipts; rather, it is to enhance documentation when it’s time to prove all income and expenses,” he said.

Taiwo also stressed that Nigerians should not rely solely on descriptions but should embrace proactive compliance.

“An alternative way every Nigerian can tax-proof their accounts is to start by paying their PAYE monthly. When it comes to Personal Income Tax, that one is filed yearly, where you need to disclose all your income from employment and other income, then the PAYE would be used to reduce your Personal Income Tax at year’s end. A gift is not income or money you keep for someone. Nigerians must understand that compliance is not about tricks but about proper disclosure,” he advised.

Similarly, Dolapo Atere, Senior Tax Consultant at KPMG, noted that the viral tweet likely drew inspiration from Section 8(2) of the Nigeria Tax Administration Act, 2025. He explained that the law requires financial institutions to ensure every taxable person provides a Tax Identification Number (TIN).

“This explains why the tweet emphasised adding descriptions to transfers; it intended to highlight how transaction details may help distinguish taxable from non-taxable income for Personal Income Tax computation, remittance, and filing,” Dolapo said.

He cautioned that while descriptions may provide initial insight into the nature of inflows, they are not decisive during audits.

“Descriptions may assist in classifying transactions for PIT purposes. But during a tax audit, after PIT remittances have been made, tax officials typically conduct a deeper review of bank inflows and outflows. The taxpayer must then provide supporting third-party documentation to substantiate the nature of the transactions, something far beyond simple transfer descriptions. Nigerians should not assume that typing ‘loan repayment’ or ‘gift’ in a transfer field is enough to satisfy compliance. It is only a starting point,” he explained.

Emmanuel Ifeanyi, Senior Tax Consultant at Andersen Nigeria, agreed that descriptions play a role in categorisation. He explained that transfers between self must be clearly mapped to avoid being misconstrued as income.

“Yes, description will help, especially for categorising the income of an individual. For example, transfer between self has to be clearly mapped to avoid being misconstrued as income to the owner. Descriptions are short explanations of what the expense is meant for. For example, a freelance web developer should properly describe the purchase of a domain and relate it to a particular project which the purchase relates to. This way, he’s able to track the direct cost of carrying out that project,” Emmanuel said.

He added a reminder that many Nigerians overlook: “Don’t forget, tax is on your income as an individual and not on the money you already have in the bank. Nigerians must not confuse cash flow with taxable income. The reforms are designed to make this distinction clearer, but taxpayers must also play their part by keeping records and understanding the difference.”

The way forward: Tax compliance beyond descriptions

So, will transaction descriptions save you from tax headaches? Not entirely. They are helpful for clarity and personal record-keeping, but they are not decisive during audits. Tax officials will scrutinise inflows, whether or not you added a description.

The real safeguard lies in proactive compliance:

Prepare for audits by maintaining third-party documentation, not just transfer notes.
Pay your PAYE monthly to reduce your annual liability.
Keep proper records of invoices, receipts and contracts beyond what your bank app shows.
Understand taxable vs. non-taxable inflows: income from work is taxable, gifts and transfers are not.
Use your TIN consistently across financial dealings.

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