What To Know About Income Tax Relief Season

Want to pay less taxes (legally, of course)? You might be surprised by just how many ways and how easily you can reduce your chargeable income for 2023’s tax season.

If you're reading this, you're probably looking for income tax reliefs and rebates for 2023, especially with tax season just around the corner.

Regardless of whether it’s your first time filing for taxes or whether you’re desperately trying to reduce your chargeable income, sit tight as we delve into the ways you can pay less taxes.

How much taxes are you required to pay?

If you haven’t already known, the income tax applies to your salary and is calculated on a yearly basis. Your income includes any bonus you’ve received, but it excludes the compulsory CPF contributions. 

For landlords, any income from your house rental is also taxable by law. Other forms of taxable income include commission, pension, retrenchment benefits, retirement benefits and dividends from investments. You can refer to the full list here.

You will have to pay taxes if you’re a Singapore citizen earning an annual income of S$20,000 or more, and the filing deadline for individuals is 18 April annually. The income tax is assessed based on the preceding year.

Here’s how much you’ll have to pay based on your chargeable income:

How can I qualify for tax relief schemes?

Thankfully, there are many tax relief schemes that you can qualify for. By being a mother or signing up for a course to upskill, you are entitled to relief schemes that can help to subtract your taxable income by up to S$80,000. 

1. Save up for retirement 

One of the best ways to qualify for tax reliefs is by essentially saving up for you or your loved one’s retirement, by either making a CPF or SRS top-up. Every S$1 that you put in corresponds to S$1 deducted from your total chargeable income that is used to calculate your taxes. Sounds good?

CPF top-up: 

To qualify for tax relief, you can top up your CPF SA up to S$8,000, and the corresponding amount will be deducted from your chargeable income. On top of that, you can further reduce it by topping up a maximum of S$8,000 to your loved one’s CPF SA and RA. However, you can only top up until you reach the Full Retirement Sum (FRS), which is at S$198,000 in 2023.

SRS top-up:

You can make an SRS contribution to top up your SRS account as many times a year as you like, up to a maximum of S$15,300 for Singaporean citizens/PRs, and S$35,700 for foreigners.

Since the interest rate of your SRS is only at 0.05%, you’re better off investing the funds in that account to avoid depreciation due to inflation.

You don’t need to declare or update anything on your end, since both CPF and the local banks that are operating SRS accounts will automatically report your transactions directly to IRAS. You would also need to make all top-ups by 31 December 2022 to qualify for tax reliefs in 2023.

Medisave top-up:

For cash top-ups to MediSave Account, the amount is subject to your BHS. Once your BHS has been reached, no further top-ups can be made to your MediSave Account. If you exceed your BHS from the top-up,  your top-up will be fully refunded to you.

2. Take care of your children

If you have a child, you are also eligible for several tax reliefs. If you’re a working mother, there are even more reliefs you can qualify for to get the maximum tax deductions.

On top of that, you’re also able to deduct from your chargeable income if you are engaging the help of your parents, grandparents, in-laws and even grandparents-in-law (including ex-spouses) to take care of your children. If you require more help and plan to hire a domestic helper, you’ll be able to receive some tax reliefs under the Foreign Domestic Worker Levy Relief, though it caps at one domestic helper.

Aside from tax reliefs, there is also a Parenthood Tax Rebate for parents: S$5,000 for the first child, S$10,000 for the second child and S$20,00 for third and subsequent child.

During Budget 2023, the government has made some changes to the relief that parents can qualify for, under the Working Mother Child Relief (WMCR) scheme. ThThe WMCR amount for eligible working mothers in respect of a qualifying child who is a Singapore citizen born or adopted on or after 1 January 2024 is as follows: 

3. Care for your parents

Though filial piety is usually the main reason for taking care of your parents or grandparents especially as they get older, the additional perk of a tax relief makes it a whole lot sweeter. Depending on whether your parents are handicapped or whether you are living with them, the amount of relief given differs.

Though the reliefs are mainly titled ‘Parent Relief’, they also apply to in-laws, grandparents and grandparents-in-law, given that they are not earning more than S$4,000 a year.

Aside from these mentioned, there are also tax reliefs available for caring for your handicapped sibling or spouse. You can check out the details here.

4. Purchase life Insurance

Who knew that protecting your life could also help in tax reductions?

Under the Life Insurance Relief, anyone who has paid annual insurance premiums on their own life insurance policies will be able to claim for tax reductions. Married men are also eligible if they pay for their spouse’s life insurance premiums.

The catch? Your total contributions in the preceding year have to be less than S$5,000 for you to make the cut, which includes compulsory employee CPF contributions, self-employed Medisave/voluntary CPF contributions and voluntary cash contributions to your Medisave account.

You also won’t be eligible if the premiums you’re paying for are: 

• Accident or health policies that provide the payment of policy monies on the death of a person
• ElderShield Plans
• CareShield Life Plans
• Integrated Shield Plans

5. Upskill with courses

Though not many are aware, you can actually reduce your taxes by upgrading your skills through courses. The Course Fees Relief encourages everyone to continue to upskill to enhance employability by attending courses that are relevant to their current employment, business, or to gain an academic qualification.

With that said, seminars, courses or workshops for general knowledge and skills or for leisure and hobby are not eligible. This includes attending a lesson to learn how to navigate Microsoft Office or a watercolour workshop based on your own interest.

The Course Fees Relief allows you to claim up to S$5,500 each year including course fees, examination fees and enrolment fees, and will be deducted from your chargeable income. 

Thankfully, you can also defer your claims if you’re upskilling in an area unrelated to your current job. Once you embark on a career change that is relevant to your course, you’ll be able to make the claim from a few years ago.

6. Make a donation (or two!)

Have you got a specific cause that you feel immensely passionate for? You can make a donation to the organisation and get a 250% tax reduction. These are the types of donations that you can make to qualify for tax relief:

• Cash donations
• Shares donations
• Computer donations
• Artefact donations
• Public Art Tax Incentive Scheme
• Land and Building donations

There are so many ways to reduce your taxes legally, with some as easy as making a CPF top-up for yourself or your loved one! Now that updating your claims are out of the way, the next step awaits — tax filing.

Read these more:
Personal Income Tax in Singapore - All You Need To Know
Optimise Your Income Tax, Score Better Investment Returns — Here’s How
Comfortable Retirement Through Tax Optimisation: SRS
A Complete Guide To CPF In Singapore (2023)
CPF Special Account (SA) Shielding: A Hack To Retire Better