7 Ways to Enjoy Income Tax Relief in Singapore

7 Ways to Enjoy Income Tax Relief in Singapore
Table of Contents

Are you looking to optimize your finances in Singapore? One key aspect to consider is managing your income tax effectively. In this article, we will delve into seven avenues of income tax relief in Singapore, tailored to help residents make informed decisions about reducing their personal income tax. Whether you are a Singaporean resident or planning to invest in Singapore, understanding local nuances and tax relief options can lead to significant savings.

Let us start by addressing the fundamental questions surrounding income tax and its reliefs.

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What Kind of Income is Taxable?

Income tax in Singapore applies to various sources of earnings, including:

  1. Employment income
  2. Rental income
  3. Business income
  4. Investment income

The amount of tax you pay depends on the type and amount of income you earn. Now, let us explore the next crucial question.

How Much Taxes do I Have to Pay?

To determine your tax liability, you need to consider your income, which is calculated based on your chargeable income, deductions, and applicable tax rates. Taxes in Singapore are progressive, with lower rates for lower income levels and higher rates for higher income levels.

To provide a clearer picture, here is a simplified table of Singapore's progressive tax rates for resident individuals for the Year of Assessment (YA) 2024:

Chargeable Income (USD) Tax Rate
Up to 20,000 0%
20,001 - 30,000 2%
30,001 - 40,000 3.50%
40,001 - 80,000 7%
80,001 - 120,000 11.50%
120,001 - 160,000 15.00%
160,001 - 200,000 18.00%
200,001 - 240,000 19.00%
240,001 - 280,000 19.50%
280,001 - 320,000 20.00%
320,001 - 500,000 22.00%
500,001 - 1,000,000 23.00%
1,000,001 - In excess of 1,000,000 24.00%

Retrieved from: www.iras.gov.sg

How to Lower Income Tax in Singapore

Now that you have anoverview of taxable income and tax rates, let us explore the seven methods toenjoy income tax deductions.

Save up for retirement

Singapore encourages citizens to plan for retirement by offering tax relief on contributions to Central Provident Fund (CPF) accounts. The CPF is a mandatory savings scheme that includes Ordinary Accounts (OA) and Special Accounts (SA). You can enjoy tax relief on your CPF contributions up to a certain limit.

Here are the maximum tax relief for CPF contributions:

CPF Account Maximum Tax Relief (SGD)
Ordinary 7,000
Special 7,000
Medisave 4,000

Read more about this method in our article "How to Relief Your Income Tax Through CPF Top-Ups".

How do I get tax relief on retirement savings?

To qualify for rebates on CPF contributions, you need to:

  • Be a CPF member.
  • Make voluntary cash top-ups to your CPF accounts.
  • Ensure your top-ups do not exceed the respective maximum relief amounts.

Do you know that you can invest with CPF accounts? Read all the information in our article "CPF Investment (CPFIS): How To Use a CPF Investment Account to Generate High Income".
Learn on income tax deduction by Freepik.com

Take Advantage of Rebates for Parents 

Families with children in Singapore can benefit from tax deduction schemesthat aim to ease the financial burden of raising kids. Singapore offers ChildRelief and Working Mother's Child Relief to eligible taxpayers.

The tax relief offered for having children are as follows:

Relief Type Maximum Relief (SGD)
Child Relief (per child) 4,000
Handicapped Child Relief (per child) 7,500
Working Mother's Child Relief 15% of mother's earned income

How do I get rebates via my children?

  1. Be a Parent with Singaporean Citizenship:

To qualify for child relief, you should be a Singaporean citizen. Permanent residents may also be eligible for some forms of child relief, so it is essential to check the specific eligibility criteria for your immigration status.

  1. Have Legal Custody and Care of the Child:

You must have legal custody and be responsible for the care of the child. This typically means that you are the child's biological or adoptive parent and have the legal rights and responsibilities associated with parenthood.

  1. Meet Specified Conditions for Each Type of Child Relief:

Singapore offers various types of child relief, each with its own set of conditions. Some common types of child relief include Child Relief, Handicapped Child Relief, and Working Mother's Child Relief. It is crucial to review the specific conditions for the type of relief you intend to claim. These conditions may relate to factors such as the child's age, the mother's employment status, or the child's disability status.

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Care for your parents/grandparents

Singaporeans who support their elderly parents or grandparents can benefit from tax deductions designed to ease caregiving expenses. The Parent Relief and Handicapped Parent Relief are available to eligible taxpayers.

Relief Type Maximum Relief (SGD)
Parent Relief (per parent) 9,000
Handicapped Parent Relief 14,000

How do I get tax relief on caring for parents?

To qualify for tax relief for caring for parents or grandparents, you need to:

  1. Be a Singaporean citizen.
  2. Provide support and maintenance to your parents or grandparents.
  3. Ensure they are not receiving any other relief claimed by someone else.

Upskill with courses

Investing in your education and professional development can also lead to tax savings. Singapore offers tax relief for individuals pursuing approved courses that enhance their employability and skills.

How do I get tax relief for course fees?

To qualify for tax reductions on course fees, follow these steps:

  1. Enrol in an approved course at a recognized institution.
  2. Ensure the course is related to your current job, trade, or profession.
  3. Keep receipts and documentation of your course fees.

Claim expenses incurred in the course of earning your income

Tax relief is also available for specific expenses incurred while earning your income. These expenses can include employment expenses, business expenses, and deductions related to renting out property.

Deductions for employment expenses

You can claim tax relief for employment expenses, such as uniforms, tools, or equipment required for your job. Keep records of these expenses and submit them when filing your taxes.

 Deductions for business expenses and deductions

If you are a self-employed individual or business owner, you can claim tax relief on business-related expenses and deductions. Keep detailed records of your business expenses to substantiate your claims.

Deductions for those renting out property

If you earn rental income from properties, you can claim tax relief on expenses related to the rental property, such as property tax, maintenance, and repairs. Keep records of these expenses for tax purposes.

How can I get relief for expenses incurred in the course of earning my income?

  1. To qualify for rebates for expenses incurred while earning your income, make sure to:
  2. Maintain accurate records and receipts for all eligible expenses.
  3. Understand the specific eligibility criteria for each type of expense.

Make a donation

Contributing to charitable organisations can not only make a positive impact but also reduce your taxable income through donations. Singapore offers tax reductions for donations made to approved institutions.

How do I get relief for donations?

To qualify for rebates on donations, you should:

  1. Donate to approved charities and institutions.
  2. Ensure that your donations meet the minimum qualifying amount.
  3. Keep records of your donations, including donation receipts.
income tax relief by Freepik.com

Purchase Life Insurance

Purchasing lifeinsurance not only provides financial security but also offers tax deductions in Singapore.You can reduce your taxable income by considering specific insurance policies. Here is a table summarizing the maximum tax relief for life insurance premiums:

Type of Insurance Maximum Relief (SGD)
Life insurance 7,000
Dependent insurance 5,000

How do I get tax relief on purchasing life insurance?

To benefit from rebates on life insurance premiums in Singapore, you can take advantage of the following steps:

  1. Purchase Eligible Life Insurance Policies:

Start by acquiring life insurance policies from insurers that are approved by the Inland Revenue Authority of Singapore (IRAS). It is essential to choose policies that meet the criteria set by the IRAS to qualify for tax relief.

  1. Ensure Policy Eligibility:

Before finalizing your insurance purchase, verify that the selected policies comply with the specific guidelines and conditions outlined by the IRAS. These conditions may vary based on the type of insurance and its intended purpose.

  1. Maintain Documentation:

Keep meticulous records of your insurance premium payments. This documentation is crucial when you file your income tax returns, as it serves as evidence of your eligible expenses. Ensure that your receipts clearly indicate the payment details, including the policyholder's name, payment amount, and payment date.

By following these steps and ensuring that your chosen life insurance policies align with IRAS guidelines, you can successfully claim tax relief on your insurance premiums. This not only provides you with valuable financial protection but also contributes to reducing your taxable income in Singapore.

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How to lower your Income Tax for YA 2024 in Singapore

To relief your tax obligations for the Year of Assessment (YA) 2024 in Singapore, you can consider the following strategies:

Tax Relief Strategy Description Tax Reductions
Top Up CPF Accounts Contribute to your own or your loved ones' Special Accounts (SA) or to your Medisave Account. $8,000 for each category
Supplementary Retirement Scheme (SRS) Deposit funds into an SRS account for retirement savings. $15,300 for Singapore Citizens/PRs, $35,700 for Foreigners
Working Mother's Relief Available for working mothers, offering substantial relief. Up to 100% of earned income
Living with Parents or Grandparents Claim relief for residing with parents or grandparents. $18,000
Educational Course Fees Deduct fees for courses relevant to your employment or business. $5,500
Employee Expenses (Non-reimbursed) Claim expenses incurred in the course of employment that were not reimbursed by the employer. Not Applicable (N/A)
Business Expense Claims Deduct allowable business expenses if self-employed. Not Applicable (N/A)
Rental Expense Claims Deduct certain expenses related to renting out property, including a portion of the rental income and loan interest. 15% of rental income + home loan interest
Charitable Donations Obtain tax relief for donations made to approved institutions. 250% of the donation value

Note that the maximum amount of income tax deduction that you can receive is $80,000.

Eligibility for Foreigners with Permanent Residence

Foreigners who have obtained permanent residence in Singapore may have different eligibility criteria for certain tax relief programmes compared to Singaporean citizens. Understanding these nuances can help permanent residents make the most of the available tax incentives.

Strategy Eligibility for Permanent Residents
1. Top Up CPF Accounts Eligible, but conditions and amounts may vary from citizens.
2. Supplementary Retirement Scheme (SRS) Same eligibility as citizens, with identical contribution limits.
3. Working Mother's Relief Additional criteria: Child must be a Singaporean citizen.
4. Living with Parents or Grandparents Eligible, provided dependent parents/grandparents reside in Singapore.
5. Educational Course Fees Same eligibility as citizens.
6. Employee Expenses (Non-reimbursed) Same eligibility as citizens.
7. Business Expense Claims Same eligibility as citizens.
8. Rental Expense Claims Same eligibility as citizens.
9. Charitable Donations Same eligibility as citizens.
10. Purchase Life Insurance Eligible, but specific eligibility criteria and amount may vary.

How to Get a High Income  

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Kilde stands out as a dependable and potentially profitable choice within a moderate risk framework. Its unique approach to securitizing alternative assets into privately placed securities sets it apart from conventional investment platforms. 

If you prioritize both the safety and growth of your wealth, Kilde offers a promising avenue to achieve a high income. Learn more about Kilde's innovative investment opportunities and experience financial confidence by exploring the platform here.

Final Tips on Tax Incentives in Singapore

As you navigate the realm of income tax incentives, it is crucial to stay informed and avoid common pitfalls. Here are some final tips to keep in mind:

  1. Incorrectly claiming personal allowances can lead to penalties:

Ensure that you qualify for the tax reliefs you claim, and maintain proper documentation to substantiate your claims.

  1. Avoid inappropriate claims for personal allowances:

Before making any claims, thoroughly review the qualifying conditions for each relief. The Inland Revenue Authority of Singapore (IRAS) provides a personal benefits verification program on their website to help you verify your eligibility.

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Sources:

  1. www.cpf.gov.sg/content/dam/web/member/growing-your-savings/documents/INV_AnnexB.pdf
  2. www.cpf.gov.sg/member/growing-your-savings/earning-higher-returns/investing-your-cpf-savings
  3. https://www.iras.gov.sg/taxes/individual-income-tax/basics-of-individual-income-tax/tax-residency-and-tax-rates/individual-income-tax-rates

*KILDE PTE LTD (“Kilde”) is incorporated in Singapore (registration no. 201929587K) is licenced and regulated by the Monetary Authority Singapore and holds a Capital Markets Services Licence (CMS101016) and an Exempted Financial Advisor License under the Financial Adviser Act. The information provided in this marketing material is intended for “accredited investors” and “institutional investors” (collectively “qualified persons”) only. This marketing material, and any information in this marketing material, or any documentation that Kilde provides in relation to this marketing material is provided without any representation or any kind of warranties whatsoever (whether express or implied by law).

This advertisement has not been reviewed by the Monetary Authority of Singapore.

The views expressed in this blog post are solely my personal opinions and do not constitute professional financial advice. I am simply sharing my opinions with no guarantee of accuracy or completeness. No reader should make decisions based solely on the contents of this blog post. Readers should consult their own financial advisor before making any investment decisions. Neither the author of this blog post, Kilde, nor its employees will be held liable for any financial losses or damages that may result from the use of the information contained herein. Investing contains risks, including total loss of capital. Past performance does not guarantee future returns. Please conduct your own research before investing.

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Oleg Kryukovskiy
The founder & co-CEO of KILDE
Radek Jezbera
Founder & co-CEO of KILDE, a regulated platform for alternative investments.
Aleksandra Yurchenko TEST
Aleksandra is managing investor relations at KILDE
Aleksandra Yurchenko
Aleksandra is managing investor relations at KILDE

FAQ

What are tax reliefs?

They refer to deductions that lower your income. They're offered in Singapore for various reasons like family support and education, each with specific eligibility criteria to ease financial burdens.

Can foreigners in Singapore benefit from these tax reliefs?

Some programmes are available to foreigners, but eligibility criteria may vary. It is essential to review specific requirements and consult with the Inland Revenue Authority of Singapore (IRAS) or a tax professional for personalized guidance.

Are there any tax reliefs for education expenses?

While there are no specific programmes for education expenses, you can explore the Workfare Skills Support (WSS) Scheme and SkillsFuture initiatives for subsidies and support in upgrading your skills.

Do I need to apply for tax reliefs, or are they automatically granted?

Most tax reliefs require you to meet certain conditions and make claims when filing your income tax returns. Ensure that you provide accurate information and documentation to support your claims during the tax filing process.

How can I stay updated on changes to Singapore's tax laws and regulations?

To stay informed about all updates and changes, regularly visit the Inland Revenue Authority of Singapore (IRAS) website, where you can find the latest information, guidelines, and resources regarding taxation in Singapore.

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