An Easy Guide To Personal Income Tax Rebate

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As 2020 comes to a close soon, now’s the time for some self-reflection in preparation for the New Year. This is also the best time to account for your finances, as well as estimate and set aside the amount of taxes you are likely to pay next year.

For the benefit of recent graduates who have just entered the workforce, the personal tax filing season in Singapore is from March to April every year. You will need to report all relevant sources of income* earned from 1 January to 31 December 2020 to IRAS next March/ April.

The current income tax rate1 in Singapore ranges between 2% and 22%, which is charged based on your taxable annual income less tax reliefs.

To help you reduce your tax bill, read this guide for the personal income tax rebates you may qualify!

What are the common tax reliefs I can claim?

Income tax relief

Having just entered the workforce recently, you are probably a single in your early 20s, fresh out of school or national service in the past one or two years. Here are some common tax reliefs you may claim, classified into five categories:

  1. Saving for your retirement:
    • CPF cash top-up relief, and
    • Supplementary Retirement Scheme (SRS) relief**
  2. Supporting your family:
    • (Handicapped) Parent/ (Handicapped) Grandparent/ Handicapped Sibling relief
  3. Lifelong learning and skill upgrading:
    • Course Fees relief
  4. Donations
  5. Protecting your dependants:
    • Life insurance relief

Note that the maximum tax relief you can claim is S$80,000 per year. Therefore, you should check the reliefs you may qualify and plan ahead so as to maximise your tax rebates.

1. Saving for your retirement

“I just started working, isn’t it too early to start saving for retirement?” Nope, it’s never too early to start saving. In fact, the earlier you start, your retirement savings will have much more time and potential to grow!

Topping up your CPF account with cash is one of the easiest and ideal ways to save and reduce your tax bill at the same time. The CPF interest rate is currently fixed at 4% per annum for Special and Retirement accounts2. Besides, you get dollar-to-dollar deduction from your chargeable income for the cash you put into these accounts, subject to the following caps:

Tax relief

Annual limit

CPF cash top-up relief3:

Top up to your Special Account, or Retirement Account for your dependents aged 55 years and above

S$7,000

SRS relief4:

Open an SRS account with an SRS operator to make contributions to the account.

S$15,300 (Singaporean or Singapore Permanent Resident), or
S$35,700 (foreigner)

These two reliefs are granted automatically to eligible taxpayers based on CPF Board records, so you don’t need to claim them.

2. Supporting your family

If you are working to support your family members, be it parents, grandparents or handicapped siblings, the good news is there is some relief in terms of tax deductions. Refer to below table to see if you qualify for these tax reliefs and how much you can claim:

Tax reliefQualifying Conditions

Amount per dependant

Parent relief (includes grandparents)Dependant staying together with you in Singapore?

Y

S$9,000

Dependant’s age 55 years or above?

Y

Dependant’s annual Income exceed S$4,000?

N

Have you incurred S$2,000 or more in supporting dependant who stays apart from you?

Y

S$5,500

Dependant’s age 55 years or above?

Y

Did dependant’s annual Income exceed S$4,000?

N

Handicapped Parent relief (includes grandparents)Dependant staying together with you in Singapore?

Y

S$14,000

Dependant’s age 55 years or above?

Y

Is dependant physically or mentally disabled?

Y

Did dependant’s annual Income exceed S$4,000?

N

Have you incurred S$2,000 or more in supporting dependant who stays apart from you?

Y

S$10,000

Dependant’s age 55 years or above?

Y

Is dependant physically or mentally disabled?

Y

Did dependant’s annual Income exceed S$4,000?

N

Handicapped Sibling reliefDependant staying together with you in Singapore?

Y

S$5,500

Have you incurred S$2,000 or more in supporting him/her?

Y

Do note the following exclusions before you claim:

  • You may claim Parent/ Handicapped Parent Relief for up to two dependants only
  • You may share the Parent/ Handicapped Parent Relief based on an agreed apportionment between the claimants
  • You will not be able to claim Handicapped Sibling Relief if someone else in the household has already claimed any other reliefs on the same sibling.

3. Lifelong learning and skill upgrading

You may have graduated from formal education, but that doesn’t mean you should stop learning. In fact, you will qualify for Course Fees relief of up to S$5,500 if you have attended any training relevant to your current employment. Even if the course you attended isn’t related to your current employment, don’t be in a hurry to throw away those invoices. You can still claim for tax relief in the future when you make a successful career switch.

It certainly pays if you continue to upgrade or reskill to enhance employability in the new economy!

4. Donations

To encourage Singaporeans to give back to the community, donations to IPCs (Institutions of a Public Character), IPC facilities, events or programmes qualify for a generous 250% tax deduction.

Simply put, if you donate S$2,000 to SPCA this year, you will get S$2,000 x 250% = S$5,000 deducted from your chargeable income in 2021. Besides cash donations, you may also donate the following tax-deductible items to qualify for the relief:

  • SGX-listed shares
  • Units in locally traded unit trusts
  • Artefacts, sculptures or artworks to National Heritage Board
  • Property

5. Protecting your dependants

Make more out of your savings with GIGANTIQ

Did you know that you can also claim tax relief for annual premiums paid on your life insurance policies? This is provided:

  • your total CPF contribution for the year doesn’t exceed S$5,000, and
  • the insurance company must have a branch or office in Singapore.

While you may flinch at the thought of burdening your financial commitments with buying life insurance, it is actually a wise move to make. The younger you make that purchase, the cheaper your premium is for maximum coverage. Furthermore, you will be able to lift the financial burden off your dependants in the unfortunate event of your death, total and permanent disability or critical illness.

#TiqOurWord Protect your life with a flexibility of choices at Tiq by Etiqa Insurance. Choose from ePROTECT term life, DIRECT – Etiqa term life and whole life to cover your unique needs. Find out more about these plans here!

Make your money work for you

Act soon based on this guide for some tax savings next year. It doesn’t matter how much you have; what matters more is how you make your money work.

Besides shrinking your tax bill, you may also want to consider boosting your savings with GIGANTIQ, an easy all-in-one insurance plan with savings and optional protection riders to fulfil your life goals. Start saving from just $50 today! Learn more here

* Refer to the IRAS page on taxable and non-taxable income in Singapore here 
** for Singaporeans and Singapore permanent residents only

References:

1 IRAS (2020, February 17) https://www.iras.gov.sg/irashome/Individuals/Locals/Working-Out-Your-Taxes/Income-Tax-Rates/

2 CPF (2020) https://www.cpf.gov.sg/Members/AboutUs/about-us-info/cpf-interest-rates

3 IRAS (2020, February 25) https://www.iras.gov.sg/IRASHome/Individuals/Locals/Working-Out-Your-Taxes/Deductions-for-Individuals/CPF-Cash-Top-up-Relief/

4 IRAS (2020, November 18) https://www.iras.gov.sg/IRASHome/Schemes/Individuals/Supplementary-Retirement-Scheme–SRS-/

[End]

Information is accurate as at 2 December 2020. This policy is underwritten by Etiqa Insurance Pte. Ltd. (Company Reg. No. 201331905K). Protected up to specified limits by SDIC.

GIGANTIQ is not a bank account or a fixed deposit. It is an insurance savings plan that earns a crediting interest rate. This product’s availability is based on a first-come, first-served basis and Etiqa Insurance reserves the right to close the tranche at any time without prior notice.

As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid. You should seek advice from a financial adviser before deciding to purchase the policy. If you choose not to seek advice, you should consider if the policy is suitable for you. This advertisement has not been reviewed by the Monetary Authority of Singapore.

 

Tiq by Etiqa Insurance Pte. Ltd.

A digital insurance channel that embraces changes to provide simple and convenient protection, Tiq’s mission is to make insurance transparent and accessible, inspiring you today to be prepared for life’s surprises and inevitabilities, while empowering you to “Live Unlimited” and take control of your tomorrow.

With a shared vision to change the paradigm of insurance and reshape customer experience, Etiqa created the strong foundation for Tiq. Because life never stops changing, Etiqa never stops progressing. A licensed life and general insurance company registered in the Republic of Singapore and regulated by the Monetary Authority of Singapore, Etiqa is governed by the Insurance Act and has been providing insurance solutions since 1961. It is 69% owned by Maybank, Southeast Asia’s fourth largest banking group, with more than 22 million customers in 20 countries; and 31% owned by Ageas, an international insurance group with 33 million customers across 16 countries.

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