Why KRA will tax Kenyans for unexplained Bank Deposits
Kenya Revenue Authority (KRA) can tax unexplained bank deposits (including those via M-Pesa or other accounts) under Kenyan tax law because such funds are presumed to be taxable income unless the account holder proves otherwise with documentary evidence. This approach, known as "bank deposit analysis" or "banking analysis", has been upheld in multiple rulings by the Tax Appeals Tribunal and courts, most recently in early February 2026. Legal Basis 1. Under Section 3 of the Income Tax Act, income includes "gains or profits" from business, employment, or other sources. Unexplained deposits are treated as prima facie (initially assumed) taxable income if they don't align with declared earnings or have no clear non-taxable explanation. 2. Section 56 of the Tax Procedures Act places the burden of proof on the taxpayer. Once KRA issues an assessment (e.g., based on bank data showing discrepancies like high deposits but low/nil returns), the assessment is ...