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The Ultimate Guide to Income Tax Deductions

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Although income tax in Singapore is calculated based on the taxpayers’ total earnings, it’s possible to end up with a lower tax bill than those who happen to earn much less. The trick here is to calculatedly take advantage of the many tax reliefs available in Singapore. 

Now, to help with that, this article explains the whole concept of tax reliefs, and then proceeds to walk you through some of the common deductions, relief schemes, and rebates you could use to reduce your Singapore income tax. 

What Are Tax Reliefs or Deductions?

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To understand what tax reliefs are and how they apply in Singapore, you have to first get the gist of how taxes are evaluated. 

That said, the first thing you’ll need to calculate before paying taxes is your Assessable Income. This refers to the total amount of taxable income you earn by the end of the financial year. It includes your employment income, as well as earnings from all sorts of investments and jobs within Singapore. 

Now, at this point, one thing you’ll appreciate about Singapore’s tax policies is, they happen to leave out non-taxable earnings from your Assessable Income. That means you can exclude your overseas earnings, capital gains, government pensions, etc. 

But, it doesn’t stop there. It also turns out that the Inland Revenue Authority of Singapore (IRAS) won’t directly charge you taxes based on the Assessable Income. Rather, it allows you to make deductions in the form of tax reliefs, before ultimately deriving your tax bill from the remainder. 

Tax reliefs are basically standard statutory deductions that you could use to reduce your taxable income. You can think of them as some form of tax benefits that the government of Singapore offers to support social and economic objectives such as family prosperity, employment, child development, skill advancement, etc. 

As such, you’ll find schemes like parent relief, child relief, foreign maid levy relief, handicapped sibling relief, and life insurance relief, among others. You just need to identify the ones you qualify for, and then deduct the applicable amounts. 

It’s only after you make the tax relief deductions that you finally establish your Chargeable Income. And for the sake of clarity, Chargeable Income refers to the actual amount on which tax is levied. You simply derive it by subtracting tax reliefs from your Assessable Income. 

How to Reduce Income Tax and Qualify for Deductions

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The thing about tax relief schemes in Singapore is, they all come with certain conditions. That means you can only qualify for one after meeting a predetermined set of requirements. 

And when it comes to that, it’s worth noting that while each scheme has its distinct criteria, one standard requirement for all the tax deductions is, you have to be a resident taxpayer. 

Yes, that’s right - as a foreigner, you need to have stayed and worked in Singapore for at least 183 days in a tax year to even consider leveraging the tax reliefs. Otherwise, you could proceed either as a Singapore Citizen (SC) or a Singapore Permanent Resident (SPR). Both are considered tax residents in Singapore. 

Now, once you’ve satisfied this basic requirement, you can begin looking into the various tax relief schemes to determine the ones that you qualify for. This is where you could boost your qualification chances by: 

Donating to Charity

The IRAS is known to reward taxpayers who are generous enough to make charitable donations. It essentially allows you to claim tax deductions that are equivalent to twice or thrice the amount you’ve donated in the form of cash donations, land building donations, artifact donations, computer donations, or shares donations. 

All these donations should be made to Qualifying Grant-making Philanthropic Organizations or any approved Institution of Public Charter (IPC). 

Contributing to the Supplementary Retirement Scheme (SRS)

Although Singapore already has a compulsory savings and pension plan for workers called Central Provident Fund (CPF), the government offers SRS to act as a supplementary voluntary program for Singapore Citizens, Singapore Permanent Residents, and work visa holders. 

In essence, every single dollar you contribute to the SRS program can be deducted from your taxable income. That means your tax relief amount will be equivalent to your total contribution. 

And speaking of which, Singapore Citizens and Singapore Permanent Residents can go up to S$15,300 per year, while foreigners with work visas have the privilege of throwing in as much as S$35,700 every year. 

Topping up Your Central Provident Fund (CPF)

SRS is not the only option for supplementary retirement savings. You could also reduce your income tax by topping up your CPF contributions. Singapore’s CPF Minimum Sum Topping Up Scheme recognizes supplementary contributions from both individuals and their employers. 

Basically, every single dollar that you supplement (up to S$7,000) entitles you to a tax relief worth the same amount. If the top-up amount happens to exceed that, the IRAS caps your tax relief at S$7,000. 

But, the benefits don’t end there. It turns out you could also file claims for the top-ups that you contribute to your parent’s, grandparent’s, sibling’s, or spouse’s CPF. This too is capped at S$7,000, which cumulatively translates to a maximum tax relief of S$14,000 per year. 

Deducting Your Rental Property Expenses

While Singapore charges taxes on rental income, it tends to give property owners the benefit of deducting property expenses from their taxable income. You can go ahead and deduct expenses such as property maintenance costs, general repair costs, management fees, fire insurance payouts, mortgage interest payments, plus property tax payouts. 

While you’re at it, you need to ensure that the costs were incurred during the tenancy period, and they came about purely for the purpose of generating rental income. 

Tax Relief Schemes and Rebates in Singapore

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All in all, here are the top tax relief schemes and rebates that you might want to consider across various categories; 

Deductions for Individuals

Some of the tax reliefs and rebates available for individuals in Singapore include; 

  • Supplementary Retirement Scheme (SRS) Relief. 
  • Parent/ Handicapped Parent Relief: To help you take care of your parents, grandparents & great-grandparents, including in-laws. 
  • NSman (Self) Relief.
  • Life Insurance Relief.
  • Handicapped Brother / Sister Relief.
  • Earned Income Relief.
  • CPF/ Provident Fund Relief: Compulsory and Voluntary Medisave Contribution.
  • CPF/ Provident Fund Relief: For self-employed individuals and employees who also happen to be self-employed. 
  • CPF / Provident Fund Relief: For Employees Only.
  • CPF Cash Top-Up Relief.
  • Course Fees Relief.
  • Working Mother's Child Relief.
  • NSman (Wife) Relief.
  • Grandparent Caregiver Relief.
  • Foreign Maid Levy Relief.
  • Spouse/ Handicapped Spouse Relief.
  • Qualifying/ Handicapped Child Relief.
  • NSman (Parent) Relief

Deductions for Families and Married Couples

If you’re married or you happen to have a family, you could apply for the following tax reliefs and rebates: 

  • NSman Wife Relief: This is automatically granted to women who are married to husbands who qualify for NSman Self Relief. That means they don’t really need to apply manually.  
  • Grandparent Caregiver Relief (GCR): This is a tax relief package for working mothers who seek childcare assistance from their grandparents, parents, grandparents-in-law, or parents-in-law. 
  • Foreign Maid Levy (FML) Relief: This is intended to encourage married mothers to keep working - as they get to claim reliefs for all the levies they pay for their foreign domestic workers. 
  • Parenthood Tax Rebate (PTR): This is granted to married, divorced, or widowed individuals who have kids. 
  • Working Mother's Child Relief (WMCR): Applies to working married women who have kids. 

Deductions for Employees

Employees can also claim tax deductions on the costs they’ve incurred while performing their job duties, but are yet to be reimbursed by their employers. 

This includes: 

  • Traveling costs incurred on public transport - eg taxis, trains, and buses. 
  • Subscription payments made to professional associations for the sake of networking, training, and skill advancement. 
  • Funds for buildings mosques and any other authorized religious dues. 
  • Entertainment costs incurred while entertaining customers. 

Deductions on Rental Expenses

The IRAS further allows you to file for tax relief on rental expenses that were incurred for the sake of generating rental income. What’s more, you can only include expenses that came up during the tenancy period. 

They include: 

  • Utility expenses.
  • Internet charges / expenses.
  • Furniture and fittings costs. 
  • Costs of supervision or management fees.
  • Costs of securing tenants.
  • Property maintenance costs. 
  • Property repair costs. 
  • Payments for fire insurance covers. 
  • Property tax payments. 
  • Interest paid on mortgages and housing loans. 

Deductions for Self-Employed Individuals, Sole Proprietors, and Partners in a Partnership

As a self-employed individual, a sole proprietor, or a partner in a partnership, you can claim tax deductions for: 

  • Double Tax Deduction for Internationalisation Scheme.
  • Business and IPC Partnership Scheme (BIPS).
  • Business making losses and unabsorbed capital allowances.
  • Costs incurred before business commencement. 
  • Land Intensification Allowance.
  • R & D Expenditure.
  • Medical expenses.
  • Capital Allowances (CA) on fixed assets.
  • Capital Expenditure incurred during refurbishment or renovation works.
  • Productivity and Innovation Credit (PIC).
  • Business expenses. 

Deductions Under Angel Investors Tax Deduction Scheme (AITD)

Thanks to Singapore’s Angel Investors Tax Deduction Scheme (AITD), you can claim tax relief when: 

  • You put money into qualifying start-up businesses between the 1st of March 2010 and the 31st of March 2020. 
  • You put S$100,000 or more into a qualifying startup business within the first year of your initial investment. 
  • You maintain your startup investment for two or more years. 

Deductions on Donations

Since 2014, the IRAS has given donors the benefit of claiming tax reliefs of up to 2.5 to 3 times their total donation amount. 

Some of the covered donations you could claim tax deductions on include: 

  • Land and building donations.
  • Public Art Tax Incentive Scheme.
  • Artifact donations.
  • Computer donations.
  • Shares donations.
  • Cash donations. 

How to Start Filing Your Tax Reliefs in Singapore

While we all appreciate the many available tax relief schemes, the fact of the matter is, such a huge volume can be a bit overwhelming. It takes a lot of time and effort to follow up on them and compare the terms. 

But then again, you can save yourself the trouble by simply working with our seasoned tax professionals. Get in touch with Wealthbridge today and we’ll help you not only reduce your income taxes in Singapore, but also plan everything accordingly. Check our services here.

If you need more help with your income tax, we've prepared a complete guide here.

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