Simple ways to reduce your income tax bill in Singapore (legally)
Below we look at ways in which a Singapore resident can legally reduce his or her tax bill:
Earned income relief
Income tax relief of between $1,000 and $8,000 is available if you have taxable income from employment, a pension, or a trade, business or profession . The relief increases from $1,000 (if you are below 55) to $6,000 for those who are 55-59 and $8000 for those over 60. The exemption amount increases to a minimum of $4,000 and a maximum of $12,000 in the case of physical or mental disability.
Any individual whose spouse does not have an annual income exceeding $4,000 can claim spouse relief, limited to a maximum of $2,000. If the spouse has a disability, the exemption limit is $5,500. None of the children can claim parent relief, if spouse relief has been applied.
Qualifying/handicapped child relief (QCR/HCR)
A parent, maintaining an unmarried child aged below 16 years, can claim a qualifying child relief (QCR) provided the child has an annual income less than $4,000. If the child has a disability, the exemption limit increases to $7,500.
Working mother’s child relief (WMCR)
This scheme is intended to encourage women to continue to work after having children. It also indirectly encourages parents to take up Singapore citizenship for their children. Starting at 15% of the mother’s earned income, the exemption is increased by 5% for each new child, and limited to a maximum of 25% for three or more children. It should be noted that the QCR/HCR plus WMCR is capped at $5,000 per child.
Parent/handicapped parent relief
A Singaporean who supports his parents, grandparents, parents-in-law or grandparents-in-law can apply for parent relief. To receive benefit under this scheme, the dependant should be at least 55 years of age, or have a physical/mental disability. Depending on whether the dependent lives with the taxpayer or not, the exemption varies from $5,500 to $9,000. If the dependent has a disability, then the minimum and maximum exemption limits are $10,000 and $14,000 respectively.
Grandparent caregiver relief
Grandparent Caregiver Relief (GCR) is a relief given to working mothers who engage the help of their parents, grandparents, parents-in-law or grandparents-in-laws (including those of ex-spouses) to take care of their children. The caregiver must be a Singapore resident, and should not be employed or running a business. Similarly, the child should be a Singapore citizen, but not aged more than 12. A claim of up to $3,000 is allowed under this rule.
Handicapped brother/sister relief
An individual who supports a sibling or sibling-in-law with a disability is eligible for this relief. The maximum exemption allowed is $5,500 for each sibling or sibling-in-law.
Central Provident Fund (CPF) Relief
To encourage individuals to save for retirement, the regulator provides Central Provident Fund relief for any employees who are Singapore citizens or permanent residents. The Ordinary Wage (OW) ceiling currently stands at $6,000 per month.
Life Insurance Relief
Those individuals who have made a total compulsory employee CPF contribution or self-employed Medisave/Voluntary CPF contribution, or both, of less than $5,000 in total in any one year are eligible for Life Insurance relief. The difference between $5,000 and the CPF contribution can be claimed as exempt. Additionally, 7% of the your own or your spouse’s insured value (if you are the policy holder) or the insurance premium paid, whichever is lower, can be claimed as a relief.
Course Fee Relief
This is offered to encourage individuals to upgrade their skills and improve their job opportunities. The scheme is aimed primarily at those individuals who are currently, or were previously, employed on a full-time basis. Regardless of the number of courses attended, a maximum claim amount of $5,500 is possible under this scheme. If the assessable income is less than or equal to $22,000, then a deferred claim is acceptable within two years from the date of taking the course.
Foreign Maid Levy Relief
This is another scheme established to encourage women to stay in the workforce. According to this scheme, a woman with school-attending children can claim relief for any salary paid in the prior year to a foreign domestic worker. As much as twice the salary paid in the previous year to the maid can be claimed as a relief.
CPF Cash Top-up relief
This scheme allows an individual to claim relief based on any cash top-ups made to the Central Provident Fund. Even cash top-ups made to other members of the family are allowable. A claim of up to $14,000 ($7,000 each for oneself and one’s family members) can be made under this scheme.
Supplementary Retirement Scheme (SRS) Relief
The SRS is a program started by the Singapore government in 2001 to address the financial needs of an ageing population. The program, operated by the private sector, complements the CPF (Central Provident Fund) with attractive tax benefits. Contributions to SRS are eligible for tax relief, subject to a maximum amount of $12,750 for Singapore permanent residents and $29,750 for resident foreigners. The SRS operator provides the information automatically and so there is no need to claim relief separately in one’s tax return.
NSman (Self/Wife/Parent) Relief
This scheme recognizes the contributions of individuals to the National Service (NS) in the previous work year (1st April to 31st March). Any operationally ready NSman is eligible for this tax relief. The amount of the claim can range from $1,500 to $5,000, depending on whether an individual has performed NS activities in the previous year, and, if so, his role.
Parenthood Tax Rebate (PTR)
This scheme was established to encourage Singapore tax residents to have more children. The maximum tax relief is $5,000 and $10,000 for the first and second child, respectively, born after 2008. A tax exemption of $20,000 per child can be claimed for the third child, and any subsequent children.
Under this scheme, donations (cash, shares, computers, artifacts and payments under the Public Art Tax Incentive Scheme) can be used to claim tax exemptions of between 250% and 300%.