Keep calm and save the money from getting taxed by the Government legally!
Living and working in Singapore and looking for a legal way to reduce your income tax? Well, you are on the right page! I have gathered, tested and used these various legal options myself for the past few years (even this year) and today I’m willing to (again) share them to you, so you too can benefit from it – getting income tax reduction. Depending on your income and tax bracket, but by doing these tax reductions options I’m sharing you, you can even end up paying zero tax, yes $0 tax paid. For my case, last year I managed to reduce my tax to 40% less. So do check out the tax reduction options here and have a look at the illustrations so that you have the better idea how much you can reduce your Income tax and at the same time knowing how much your hard-earned money is saved!
- Find out ways you can reduce your Income tax payment with all these legal tax-reduction options.
- Depending on your Income and Tax bracket, you may end up saving up to 100% in tax payment. Do look for illustration on step 3) below.
- For more interesting article like this, head to FREE, Life, Travel, Singapore and more at JILAXZONE.
| For your information: I am not a Tax consultant nor someone who are expert in Tax. I am just a normal person who like to put a fight on my hard-earned money, utilizing all the options given by the Government to evade or pay less tax legally. All tax related information written here is true at the time when this article is written, however you MUST ensure yourself that the information is still valid and true – on each item (whenever applicable), link to the official Government website is provided so that you can easily cross-check and ensure the validity. All in all, I won’t take any responsibilities for any kind of good and especially bad things including losses/damages that may incur and/or occurred to you from reading and following what’s written on this article. The article is provided as-is based on my research as well as my own years of experiences on executing them. For you case: Do it on your own risk. |
Here’s how you can reduce your Income Tax in Singapore and save your hard-earned money
Paying less Income tax = more money saved to your pocket!
Reduce your Income tax with these 3 steps:
Step 1) Knowing your tax bracket.
Step 2) Maximizing the tax reliefs you can get.
Step 3) Calculate your tax outcome.
Repeat step 2) and step 3) until you get the number you want to pay tax for.
| Note: In case you are having difficulty reading this article, do consider to open it on your PC/Mac browser or if you are using mobile phone, try open the actual page – and not the Google AMP page. |
Step 1) Knowing your tax bracket
Knowing the tax bracket and where you are in the tax bracket will reveal you how to maximize your tax savings. Here are the available Singapore Tax bracket.
| Tax Bracket | Chargeable Income | Income Tax Rate (%) | Gross Tax Payable ($) |
|---|---|---|---|
| 1 | First $20,000 Next $10,000 | 0 2 | 0 200 |
| 2 | First $30,000 Next $10,000 | – 3.50 | 200 350 |
| 3 | First $40,000 Next $40,000 | – 7 | 550 2,800 |
| 4 | First $80,000 Next $40,000 | – 11.5 | 3,350 4,600 |
| 5 | First $120,000 Next $40,000 | – 15 | 7,950 6,000 |
| 6 | First $160,000 Next $40,000 | – 18 | 13,950 7,200 |
| 7 | First $200,000 Next $40,000 | – 19 | 21,150 7,600 |
| 8 | First $240,000 Next $40,000 | – 19.5 | 28,750 7,800 |
| 9 | First $280,000 Next $40,000 | – 20 | 36,550 8,000 |
| 10 | First $320,000 In excess of $320,000 | – 22 | 44,550 |
In case you are wondering how to read the information, check out these samples:
Sample 1: Annual income $36,000 (Monthly income $3,000)
You are on Tax bracket #2, because income of $36,000 is within Tax bracket #2 maximum income of $40,000 (First $30,000 and Next $10,000).
Sample 2: Annual income $120,000 (Monthly income $10,000)
You are on Tax bracket #4, because income of $120,000 is within Tax bracket #4 maximum income of $120,000 (First $80,000 and Next $40,000).
For your information: All the tax bracket numbers above is coming from Singapore IRA official website, here: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/
Under which number is your tax bracket? Using the information above, you can roughly calculate how much you need to pay for the next year tax assessment. And using the information below on Step 2), you can lower the tax you need to pay and even shift to a lower tax bracket.
Chargeable income is all your income combined, that includes income & bonus from your employer, income from your blogging, vlogging activities, income from your other jobs (food delivery, selling items at Carousell).
Step 2) Maximizing the tax reliefs you can get
Singapore Government and IRAS have a long list of tax reliefs you can get, some of them are automatically granted during each tax year while some requires your actions. Below are the full list of tax reliefs from IRAS.
Do take your time to read and understand all these entries in the list. In case you need help, feel free to reach me by commenting on the comment section down below, I’ll be happy to assist- free of charge!
For your information: There’s a tax relief cap of $80,000 applies to the total amount of all tax reliefs claimed (including any relief on cash top-ups made). Read here for more details: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals–Reliefs–Expenses–Donations-/#title8.
| Tax Relief | Description |
|---|---|
| Course Fees Relief | For those who are taking courses and get professional certifications, can get up to $5,500 in tax relief. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Course-Fees-Relief/ |
| CPF Cash Topup Relief | You can get up to $49,000 (can be more or less) in tax relief if you are topping up CPF: $7,000 to your own CPF account and $7,000 to your spouse, parents, grandparents, siblings CPF account. Yourself + 1 spouse + 2 parents + 2 grandparents + 1 sibling = 7 persons, if for each person, you do cash top-up $7,000, that’s $49,000 in total. You can add/subtract the number of persons based on your conditions. Since CPF is basically pension account which earn interest, the earlier you topping up, the more benefit (read: interest) you are getting. Do it the earliest possible. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/CPF-Cash-Top-up-Relief/ |
| CPF Relief | Another CPF relief, how much you can get depends on how much your CPF contributions are. If you are contibuting $20,000 to CPF account, then you’ll get $20,000 in tax relief. For better understanding, do check the following link: if you are employee: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/CPF–Central-Provident-Fund–Relief-for-Employees/ If your employer is participants of auto-inclusion scheme, you don’t need to file this relief as it will be auto-inluded as part of tax relief. If you are self-employed: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/CPF–Central-Provident-Fund–Relief-for-Self-Employed/ |
| Earned Income Relief | If you are below 55 years old, you’ll get $1,000 in tax relief If you are 55-59 years old, you’ll get $6,000 in tax relief If you are 60 years old and above, you’ll get $8,000 in tax relief This Earned Income relief is auto-included as part of relief on each year Income tax. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Earned-Income-Relief/ |
| Foreign Maid Levy Relief | To encourage woman to stay in the workforce, if you have foreign maid, you can get up to $1,440 in tax relief. This relief is only applicable for woman. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Foreign-Maid-Levy–FML–Relief/ |
| Grandparent Caregiver Relief | You can get $3,000 in tax relief if you are a working mother and have parent / grandparent is looking after your child. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Grandparent-Caregiver-Relief/ |
| Handicapped brother and sister Relief | You can get up to $5,500 in tax relief if you have and support your handicapped siblings/siblings-in-law. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Handicapped-Brother/Sister-Relief/ |
| Life Insurance Relief | You can get up to $5,000 in tax relief if you are paying life insurance and at the same time your compulsory CPF contribution was less than $5,000. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Life-Insurance-Relief/ |
| NSMan Relief | If you are NSman, you can get from $1,500 to $5,000 in tax relief. If your are married, your wife can get $750 in tax relief. Your parents, each can get $750 in tax relief as well. For more details, you can have it checked here: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/NSman-Relief–Self–Wife-and-Parent-/ |
| Parents Relief | You can get from $5,500 to $9,000 in tax relief if you are staying/taking care of your parents/grandparents. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Parent-Relief-/-Handicapped-Parent-Relief/ |
| Spouse Relief | If you are married and your spouse is not working or has annual salary not exceeding $4,000, you can get $2,000 in tax relief. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Spouse-Relief/-Handicapped-Spouse-Relief/ |
| SRS (Supplementary Retirement Scheme) Relief | SRS is basically Government initiatives to encourage people to save more for retirement, apart from contributions made to CPF. SRS is tax free before withdrawal. You can get up to $37,500 in tax relief if you contribute up to the same amount. For more details, you can have it checked here: https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Special-tax-schemes/Supplementary-Retirement-Scheme–SRS-/SRS-contributions/ |
| Qualifying Child Relief | If you have child below 16 years old or child doesn’t have annual income more than $4,000 or child is doing full time study at university, college, or any other educational institution, you can get $4,000/child in tax relief. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Qualifying-Child-Relief–QCR–/-Handicapped-Child-Relief–HCR-/ |
| Working Mother Child Relief | If you are working woman with child, you can get up to 15% tax relief of your annual salary for 1st child, 20% tax relief of your annual salary for 2nd child, and 25% tax relief of your annual salary for 3rd child and beyond. This tax relief is only applicable for woman. For more details, you can have it checked here: https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/Working-Mother-s-Child-Relief–WMCR-/ |
So, do you know which reliefs you would like to get and claim? Take note of them and check out the eligibility as well as the terms and conditions, then using your relief list you have taken note, proceed to Step 3) below.
Step 3) Calculate your tax outcome
Here’s the myth: Bigger salary is always incurring bigger income tax. The myth is proven to be wrong, especially here in Singapore, where by maximizing all the reliefs you can get, bigger salary may not always incur bigger income tax. Don’t take my word for it, check the illustrations below.
Now using the tax bracket info from Step 1) and list of reliefs from Step 2), let me show you some illustration and calculation on the possible tax outcome you may have. You can use the template I have below to calculate your own tax outcome.
For illustration purposes, I won’t use all the reliefs on Step 2), since it’s going to be super massive. Instead, I’m going to just use the following tax reliefs as example for the illustration – so you get the idea and can calculate your tax outcome based on reliefs you can get/claim.
- CPF Cash Topup Relief
- CPF Relief(*)
- Earned Income Relief(*)
- SRS (Supplementary Retirement Scheme) Relief
The one with (*), is auto-tax-deducted if you are Singapore citizens or Singapore Permanent Residents.
Illustration 1: Annual income $36,000 (Monthly income $3,000) ~ 100% tax savings
If my salary is $3,000 per month. And if I’m maximizing my CPF Top-up contribution as much as $7,000, plus I do topping-up my SRS account for $10,000, I’m getting a 100% saving on my income tax. Which translate to: I don’t pay any income tax and it’s perfectly legal!
Here’s the illustration.
| Item | Without Exercising Step 2) Tax Reliefs | Exercising Step 2) Tax Reliefs |
|---|---|---|
| Annual Salary | $36,000 | $36,000 |
| CPF Topup Relief for Self | – | $7,000 |
| CPF Topup Relief for Family | – | – |
| CPF Relief (*) | $7,200 | $7,200 |
| Earned Income Relief (*) | $1,000 | $1,000 |
| SRS Relief | – | $10,000 |
| Total chargable income for tax (Annual Salary – Reliefs) | $27,800 | $10,800 |
| Tax bracket category | 1 | 1 |
| Payable tax | First $20,000: $0 | First $10,800: $0 |
| Next $7,800: $156 | Next $0: $0 | |
| Total tax payable | $156 | $0 |
| Percentage tax saving | – | 100% |
Illustration 2: Annual income $120,000 (Monthly income $10,000) ~ 40% tax savings
If my salary is $10,000 per month. And if I’m maximizing my CPF Top-up contribution as much as $7,000, and I do CPF Top-up for my spouse for another $7,000 plus I do topping-up my SRS as much as $12,000, I’m getting a 40%+ saving on my income tax.
Here’s the illustration.
| Item | Without Exercising Step 2) Tax Reliefs | Exercising Step 2) Tax Reliefs |
|---|---|---|
| Annual Salary | $120,000 | $120,000 |
| CPF Topup Relief for Self | – | $7,000 |
| CPF Topup Relief for Family | – | $7,000 |
| CPF Relief (*) | $14,400 | $14,400 |
| Earned Income Relief (*) | $1,000 | $1,000 |
| SRS Relief | – | $12,000 |
| Total chargable income for tax (Annual Salary – Reliefs) | $104,600 | $78,600 |
| Tax bracket category | 4 | 3 |
| Payable tax | First $80,000: $3,350 | First $40,000: $550 |
| Next $24,600: $2,829 | Next $38,600: $2,702 | |
| Total tax payable | $6,179 | $3,252 |
| Percentage tax saving | – | 52.63% |
When you see the difference in amount of tax payable on the illustration above, that’s about $3,000 different.
Now with that $2,000 to $3,000 different, you can either buy a new smartphone, new TV or go travel (when it’s possible) or save the money. The choice is yours!
Act now. Don’t wait.
Current year is going to end soon, so if you plan to really save your hard-earned money by legally paying less Income tax, then delay no more! Start checking on all the tax reduction options available above and play around with your own number.
For myself, this year, I have done it and now waiting to enjoy the tax savings!
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