7 ways to legally reduce income tax in Singapore (2021)

There is no way around paying your tax. But there are several ways of at least reducing your tax bill. Follow our tips and see for yourself.

Key highlights

• Invest in yourself by doing a work-related courses — you can then claim them
• Donating money to a charity in Singapore is a great win-win situation and will earn you 250% in tax deduction
• Make sure to keep all the receipts and related documents — you will need them

Who doesn’t dream of reducing their personal income tax in Singapore? However, many people also think that this is impossible or not quite legal. But, in fact, it couldn’t be further from the truth. Singapore has a variety of different tax relief initiatives you can leverage to save some money. We have put together a list of 7 different ways you can reduce your income tax. Take a look below to find out more and see what could work for you. 

How it works

Singapore’s income tax system is progressive, which means that the more you earn, the more you will be taxed. The idea is to find things you can either write-off or claim tax relief for. While there are various ways to do that, there is also a personal income tax relief cap. This limit is currently set at S$80,000 and is the total amount of your tax relief for any given year of assessment. 

1. Do a course and upgrade your skills

This first point is unknown to many Singaporeans. However, it is possible to get tax relief on courses that you have attended — as long as the course is relevant for your employment and if you can prove that you have paid for it yourself. If that’s the case, you can get up to S$5,500 in tax relief.

If you have taken a course that will enable you to switch careers, you can still claim it. For example, if you are transitioning from an administrative role into finance, and you have taken a course that will help you in your new career, you use it for your tax relief.

2. Make a charitable donation

We love this point, as it really incentivises people to do good. In order to get a tax relief you just have to make a donation to any charity in Singapore. You can get up to 250% in tax deductions based on the donated amount.

3. Top up your CPF

This is another great way to help yourself - give yourself money and pay less taxes. Sounds great? Here is how it goes. Simply top up your CPF special account. Once done, it will be automatically deducted and you don’t have to worry about it. However, there is a limit. This means that only your chargeable income of up to S$7,000 will be considered. But it’s not the end just yet. You can also top up your parents’ CPF accounts as well and receive another tax relief for that.

4. NSman relief

Here is a tip that’s unique to Singapore. Any NSman can claim up to S$S5,000 tax relief. That is, if they are a key appointment holder in the army. If you are not part of the army, but you have served as a reservist, you can still claim up to S$3,000. But here is something that most people don’t know. Wives of NSmen can claim tax relief too, while the amount is only S$750, it’s better than nothing.

5. Life insurance relief 

If you are unemployed or self-employed, then your CPF contributions of the past year have probably been very low. If there were below S$5,000, then you qualify for this tax relief on the premiums that you have paid for your own or the life insurance policy of your spouse. You then have the choice to either to even the insurance premiums you have paid or claim the difference between your CPF contribution and S$S5,000. You can get up 7% of the policy’s value.

6. Business expenses 

Every business owner will know that there are always extra and operational costs — regardless of whether you run a small shop or a tech startup. However, the good news is that you can claim these business expenses. So make sure to keep the receipts, as you will need to fill out a number of supporting documents for the IRAS. But be aware that you can’t claim expenses that you have gotten rebused for by your business partners. Don’t even think of trying it, as the fine you risk getting is not worth it.

> How to save more on your income tax with your credit card

7. Rental expenses deductions

Last but not least, you can also earn some tax relief on your rental expenses. This refers to the expenses you have in producing the rental income. These expenses based on 15% of the gross rental income can be claimed.

One of the most important aspects of applying for tax relief and deductions is the documentation. Make sure to think ahead and keep receipts for everything. After all, they are quite literally your money. If you are not exactly sure what can be applied for and what not, then best to ask a tax consultant. 

This article is contributed by ValueChampion.