First Time Tax Payer? Here Are 6 Tax Reliefs You May Not Know About
Know what tax reliefs can lower your tax liabilities.
Recently entered the working world, and finally having a taste of what it’s like to be a working adult? Congratulations! But there’s one more rite of passage you’ll have to go through. You’ll need to file your taxes for the first time.
Admittedly, IRAS makes filing and paying taxes simple. Tax filing is done online on their myTax Portal, and if you’re a salaried employee whose wages have already been declared by your employer, you need to do little more than click submit.
But before paying your taxes, don’t forget to indicate which tax reliefs you’re eligible for. Tax reliefs lower the amount of income you will be taxed on, which means you pay lower taxes.
Here are five types of tax reliefs first-jobbers might qualify for.
Tax deduction for donations
The government gives you tax relief when you donate to charitable organisations. That’s right - when you donate to a good cause, you actually get to lower your tax payments.
Only donations to organisations classified as Institutions of a Public Character (IPC) or to the government qualify for tax deductions.
Donations will be eligible for a tax deduction of 250%.
Let’s say you donate $1,000 to the SPCA, and your income for the year is $36,000.
That makes you eligible for a tax deduction of $2,500 ($1,000 x 250%). So your assessable income for the year will be $33,500 ($36,000 - $2,500). Tax deductions for qualifying donations will be automatically reflected in your tax assessment, based on the information from IPC, and requires no action on your part.
You do not need to declare the donation amount in your income tax return. Tax deductions for qualifying donations will be automatically reflected in your tax assessments based on the information from the IPC (such as the donor's name, date and amount of donation on the tax deduction receipt). IRAS will no longer accept claims for tax deduction based on donation receipts.
The government recognises the high cost of living in Singapore and aims to help Singaporeans look after their aged parents, which is why you can claim tax relief if you have supported your parents, grandparents or parents- and grandparents-in-law during the Year of Assessment.
To qualify, your dependant needs to be at least 55 years of age (or be physically or mentally disabled), have an annual income of not more than $4,000, and you must have spent at least $2,000 in supporting him or her that year.
Taxpayer Stays with Dependant
$14,000 per dependant
$9,000 per dependant
Taxpayer Does Not Stay with Dependant
$10,000 per dependant
$5,500 per dependant
Life insurance relief
Do you have a life insurance policy that will ensure your loved ones are looked after if you pass away? If so, you might be able to claim tax relief for it.
The catch is that in order to qualify for life insurance relief, your employee or voluntary self-employed CPF contributions and Medisave contributions should have been less than $5,000 in the financial year.
For a salaried employee under the age of 35, that means you won’t qualify for this tax relief if you earn an annual salary of $25,000 a year or more.
If you qualify, you can claim the lower of the following tax relief amounts:
$5,000 minus your CPF contribution; or
Up to 7% of the insured value of you or your wife’s life.
Please refer to this link for more detailed information on the calculation of Life Insurance Relief.
To take advantage of this type of tax relief, buy a life insurance policy such as Income’s iTerm or VivoLife plans easily online. Such policies protect you and your family in the event of death, terminal illness or total and permanent disability (up to the age of 70).
Or, if you're not sure which life insurance plan is best for your needs, check in with Income's digital advisor, askSage, or connect with one of our advisors for personalised advice.
Course fees relief
If this is the first time you’re paying taxes, there’s a good chance you were enrolled in a course not long ago.
So it’s a good thing you can claim tax relief for course fees paid in the past year.
Fees for any course, seminar or conference resulting in an approved academic, professional or vocational qualification, or that is relevant to your current work, qualifies for tax relief. You can also claim for any exam, test or registration fees incurred. To find out if your course qualifies for relief, check here.
You may not, however, make claims for holiday jobs or internships, even if they did contribute to your graduation from a course of study. You also can’t enjoy tax relief for courses related to a hobby, leisure or general skills like basic website building.
Tax relief for course fees is capped at $5,500 a year. For information on how to claim your course fee relief, check here.
CPF cash top-up relief
If you’re a Singapore citizen who’s made voluntary CPF cash top-ups to your own Special Account (if you’re below 55) or Retirement Account (if you’re 55 and above), you’re eligible for cash top-up relief of up to $7,000.
You can also claim up to an additional $7,000 in tax relief for topping up the CPF accounts of your parents, in-laws, grandparents or grandparents-in-law.
You can also earn tax relief for topping up your spouse or a sibling’s account, provided they had an annual income of $4,000 or less in the preceding year.
The maximum tax relief you can claim under this category is $14,000—namely, $7,000 for topping up your own account and $7,000 for topping up a family member’s. CPF cash top-up relief is automatically granted to those who are eligible, based on the records sent to IRAS by the CPF Board.
SRS tax relief
What is SRS?
The Supplementary Retirement Scheme (SRS) is a voluntary scheme designed to help Singaporeans save for retirement. You can open an SRS account and deposit funds for retirement savings and investments, while enjoying tax benefits at the same time.
Tax relief for SRS
All SRS contributions made in a particular year will be deductible in the following Year of Assessment.
The amount of tax relief granted is the same as the amount of SRS contributions made, up to a yearly maximum of 15% of your absolute base income for Singaporeans and Singaporean PRs. The maximum absolute base income for the purposes of calculation is $102,000.
What you can use your SRS funds to invest in?
Your SRS savings can be invested or channeled into a savings or retirement plan in order to help them grow. You can consider Income’s GrowthLink, a single premium investment-linked plan that allows you to choose from a wide range of funds available with a relatively low fund management fees. It also provides protection from death and total and permanent disability (up to the age of 70).
Knowing what tax reliefs you could potentially be eligible for enables you to plan ahead and protect yourself financially, such as by getting life insurance or taking part in the SRS Scheme, while paying lower taxes at the same time.
Looking for more money saving tips? You will find many other articles with helpful information on our blog here.
This article is meant purely for informational purposes and should not be relied upon as financial advice. The precise terms, conditions and exclusions of any Income products mentioned are specified in their respective policy contracts. For customised advice to suit your specific needs, consult an Income insurance advisor.
This advertisement has not been reviewed by the Monetary Authority of Singapore.