The current rate of the highest income tax is 22%. It is important to plan out a strategy for tax relief Singapore. Managing personal finances means you need to work out a strategy for tax planning. In case you are a Permanent Resident of Singapore, a Singaporean or even a Foreigner who has stayed in Singapore for 183 days or probably more than that, you will have to pay income tax. The rates of personal income tax for the resident tax payers are progressive. This means, those who have a higher income pay a higher tax proportionately.
Calculating of the Income tax:
You need to have some understanding of how the income tax is calculated to work out some strategy for the Singapore Income Tax Relief.
The total income earned is termed as the ‘assessable’ income. For most, this is the income which is the salary you receive. This can also be an income received from free-lancing jobs or part time jobs. You need to understand not all the income which is earned in Singapore is termed as ‘assessable’ income. Capital gains made from investing in stocks or property or even earnings from any lottery is not considered as an ‘assessable’ income.
The taxable income is the salary from employment, rental income, bonus, and withdrawal from the SRS. Overseas earnings, CPF Life payouts, earnings from a lottery, capital gains and maintenance and alimony payments are all non-taxable income.
The total amount which is taxed after the deductions of personal reliefs are made of the assessable income is termed as the ‘chargeable’ income. If you have decided not to pay too much for income tax it is essential you look for tax relief, Singapore.
Voluntary top-ups of CPF Special Accounts:
Topping-up the special account of the CPF helps in better planning for the retirement. For every dollar you top-up the CPF with you are eligible for tax-relief. You can enjoy tax relief of almost $7,000 on the top-ups made on SA (special Accounts) and another tax relief of $7,000 to the top-up made on the account of your loved one. This means, you lower the income which s chargeable to $14,000 and enjoy all the more tax savings. Besides which, the money invested is an investment which is free of any risk.
Voluntary Top-ups for Medisave:
Making top-ups to the Medisave account can also offer you tax-relief, Singapore if you have not yet reached the BHS (Basic Healthcare Sum) which is $54,000 for those turning 65.
This not only saves on taxes but also helps in saving money for medical expenses in case of any requirement in the future. This money can also earn an interest of almost 4% per annum.
Using the Supplementary Retirement Scheme:
The SRS (Supplementary Retirement Scheme) is an initiative by the government of Singapore for addressing the needs of the Singaporeans. These contributions are voluntary and are eligible for Singapore income tax relief. The contributions to the SRS account are capped at $15,300 for Permanent residents and Singaporeans and for foreigners it is $35,700.
An individual who has a taxable income of $60,000 can save almost $1,070 of the income tax when the contribution made is $15,300. The contributions made to the SRS account can be utilized for investment and can also be withdrawn once you reach the age of retirement, which is 62. The taxes on the withdrawals are given a concession of almost 50%.
Contribute to a Charity which is registered Tax-deductible:
Donations in cash to an institution of the Singapore government or approved by the IPC (Institution of Public Character) for specific causes which can benefit the local are exempted from income tax. This is applicable for tax relief, Singapore only if you do not receive any gifts in return. You need to be aware that donations only to the approved IPC’s are tax-deductibles and not to just any institution.
Rental Expenses and Tax Relief:
A property which is rented out for income can be claimed for costs which are incurred while renting this out. This can include premiums for fire insurance, mortgages and costs of maintenance and repair that is paid out of the pocket.
Life Insurance Relief:
Those looking to save on income tax are able to claim for tax relief if they are paying the premiums on their own or even for the life insurance policies of their wife. You need to ensure that the total voluntary and compulsory contributions to the CPF do not exceed $5,000/ in a single year.
The tax relief is not applicable to married women who have purchased life insurance for her husband. This is also not applicable for parents who purchase life insurance for their children.
Handicapped Family Members:
Tax deductions in Singapore are also given to individuals who support a spouse, child parents or grandparent who are handicapped. This is one sort of recognition by the Singapore government.
The dependents need to be staying on a permanent basis in Singapore. It is also important that the tax payer to have incurred around $2,000 or even more in offering support to their family member who is handicapped and the dependent needs to be staying in the same household as the tax payer.
The parents or grandparents who are handicapped need to be of age 55 years or more and do not have an income of more than $4,000/.
Tax rebates and relief are offered as recognition for the efforts f an individual. Instead of offering any type of compensation for a specific type of expense, these rebates and reliefs are given for promoting specific objectives. Thus, you have reliefs for encouraging upgrading of skills, filial piety, forming families and also tax relief for individuals who are saving for their retirement or serving National Service.
If not too sure about this reduction in income tax, it is advisable to seek assistance from a qualified professional who can guide you on the right track.