8 Tax Relief Schemes To Reduce Your Income Tax Liability

Less tax?? Yes please!

Like all law abiding citizens, you surely contribute meaningfully to the public exchequer for social causes and expansion of the economy. However, given a chance, who wouldn’t want to reduce their tax liability?

What if we tell you that there are ways to reduce your income tax liability, legally? The government offers tax exemptions on earned income under various schemes. If you’re eligible, you can claim a relief anywhere between S$1,000 and S$8,000, depending on your taxable income in the previous year and your age.

Use These Income Tax Relief Schemes to Reduce Your Income Tax

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Although the tax system in Singapore is liberal and the rates are relatively low, the government has enacted tough laws and mechanisms to ensure tax compliance. Instead of risking non-compliance and the wrath of the tax authorities by adopting unfair means, find out if you qualify for these tax relief schemes instead:

Paying for Your Skill Enhancement? Ask for a Relief

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If you have taken up skill enhancing courses or degrees that improve your employability, you can claim a tax relief under the Course Fees Relief scheme. You may be eligible for this relief if you’re currently employed in Singapore or were employed in the past. To claim an exemption under the current year of assessment, you’ll have to prove that you:

  • Have attended a course, seminar or conference in the previous year that led to an approved qualification.
  • Acquired knowledge from a course or conference which is relevant to your trade, business, vocation or job in the current year.

You can also claim any course or seminar that you have attended in the past that was relevant to your trade or profession in the past year, subject to conditions.

Remember though that you won’t be able to claim a relief under this scheme if the course/conference/seminar you attended didn’t culminate into skill enhancement that relates directly to your profession or trade.

How Much Can You Claim?

In a year, you can claim up to S$5,500 in tax relief under this scheme, irrespective of the number of courses or seminars that you have attended. However, you can’t claim exemptions for fees paid by your employer or someone else on your behalf.

Exemptions can be claimed for:

  • Tuition fees
  • Examination fees
  • Aptitude test fees for computer courses
  • Registration fees

If you have paid the course fee up front for a course that spans a few years, you can spread the fee equally over the total number of years and make a claim accordingly.

Growing Your Retirement Savings Through a Cash Top-Up? Claim a Tax Relief

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If you think that one of the best ways to secure the future for your family is to voluntarily top up your CPF Special/Retirement Account or that of a close family member, you’re right! You’ll be pleased to learn that the benefit doesn’t just stop there. You can also save up to S$14,000 on income tax through the CPF Cash Top-Up Relief scheme. The best part is that you won’t have to do anything. If you’re eligible, it will be granted to you automatically by the IRAS based on the CPF records.

To be eligible, you’ll need to be a citizen or a PR. If you or your employer has contributed to your SA (if you’re aged below 55) or your RA (for those aged 55 or above), you can claim a tax relief.

Alternatively, you can also contribute voluntarily to the SA or RA of your parents, parents-in-law, spouse, grandparents, grandparents-in-law or siblings.

You can only claim a relief for cash top-ups. CPF transfers won’t be eligible for this exemption. If you want to claim a relief on cash top-ups for your spouse or siblings, you need to be aware that their annual income can’t exceed S$4,000 for the year preceding the one in which you made the top-up.

How Much Can You Claim?

You can claim up to S$7,000 for cash top-up of your CPF account and up to S$7,000 for cash top-up of the CPF Account of your relatives. For the purpose of computation of the exemption, certain limits to cash top-ups will apply.

Supporting a Handicapped Sibling? Here’s Your Chance to Save

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The cost of supporting a physically challenged or a mentally indisposed sibling or sibling-in-law in Singapore can be significant. If your sibling has lived with you in the same household or you have contributed at least S$2,000 for their treatment and support, you can claim a tax relief, individually or with other claimants, based on the agreed apportionment under the Handicapped Brother/Sister Relief scheme.

You can only be eligible if your sibling has largely lived in Singapore in the past year or has lived in Singapore for at least 8 months if he/she is a foreign dependent.

How Much Can You Claim?

Currently, you can claim a relief of up to S$5,500 per handicapped sibling under this scheme in an assessment year. However, if someone else has already claimed a relief under a related scheme such as the Handicapped Child Relief scheme for the same person, you won’t be eligible for this tax relief scheme.

Have You Been Supporting Your Parents or Grandparents? It Is Time for You to Get a Tax Relief

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If you have lived with and cared for your dependent parents, parents-in-laws, grandparents or grandparents-in-laws in the previous year, you can claim an income tax relief under the Parent Relief/Handicapped Parent Relief scheme, provided you satisfy a set of conditions.

You can claim a relief if the following conditions were met:

  • Your dependent primarily lived in Singapore in the past year or in case of a foreign dependent, they must have lived in Singapore for at least 8 months the preceding year.
  • You have lived with your dependent or you spent at least S$2,000 for their support, if they were living separately.
  • Dependents are aged 55 or above in the year under consideration. If not, he/she must have been physically/mentally disabled.
  • The annual income of your dependent, during the period, didn’t exceed S$4,000 (not applicable in case of handicapped dependents).

How Much Can You Claim?

If your dependent parent is physically/mentally fit, you can claim up to:

  • S$9,000 if you stayed with him/her
  • S$5,500 if you didn’t stay with him/her

In cases where your parent/parents are physically or mentally disabled, you can claim up to:

  • S$14,000 per dependent, if you stayed with them
  • S$10,000 per dependent, if you didn’t stay with them

Currently, multiple claimants can get relief under the scheme for supporting the same dependent, depending on the agreed distribution. You can make a claim for relief under this scheme for up to 2 dependents.

If you’re a working mother, you can claim Parent Relief/Handicapped Parent Relief and Grandparent Caregiver Relief for the same dependent.

Paid for the Expenses of Your Dependent Spouse Last Year? The Government Will Recognise Your Contribution in the Form of an Income Tax Relief

You can become eligible for this scheme only if:

  • You lived with or supported your spouse throughout the past year.
  • The annual income of your spouse didn’t exceed S$4,000 during the period (doesn’t include handicapped dependents).

If you have supported your legally separated spouse during the period, you can claim a relief if the separation was sanctioned by a court of law and the maintenance payments were made in accordance with a court order or deed of separation.

If you’re divorced and paying alimony, you won’t be eligible for this relief.

How Much Can You Claim?

You can claim up to S$2,000 during the current year of assessment for the expenses you have borne for your spouse, last year. For expenses borne for your handicapped spouse, you can claim up to S$5,500.

If you’re legally separated from your spouse, you can claim the maximum of:

  • Maintenance payments paid as per the court-monitored arrangement.
  • S$2,000 for your spouse or S$5,500 for your handicapped spouse.

If you have already made a claim for relief under this scheme, your children/children-in-law may not be able to make a claim for the same person.

Have a Dependent Child? Enjoy a Tax Exemption Under This Scheme

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If you have supported your dependent child/children last year, you can claim relief during the current year of assessment, provided:

  • You’re the biological parent, step-parent or legal parent of the child.
  • The child was aged below 16 in the previous year or was studying in a Singapore-based institution of tertiary education (Doesn’t apply to handicapped children).
  • The annual income of your child during the period didn’t exceed S$4,000 (Doesn’t apply to handicapped dependent).

The applicable child relief can be shared by you with your spouse/ex-spouse depending on an agreed apportionment.

How Much Can You Claim?

Currently, you can claim up to S$4,000 per year per child under the Qualifying Child Relief (QCR) and S$7,500 per year per child under the Handicapped Child Relief (HCR).

Furthermore, a maximum of S$50,000 (can be claimed under QCR/HCR and a Working Mother’s Child Relief (WMCR) for one child. You can first make a claim under QCR/HCR followed by a claim under WMCR, if applicable.

 

Are You a Working Mother? Enjoy Exclusive Income Tax Reliefs

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If you’re a single mother with a taxable income and have supported a child (who is a Singapore citizen as of the last day of the previous calendar year) last year, you can claim a special relief, provided your child satisfies the conditions mentioned under QCR/HCR.

How Much Can You Claim?

Depending on the child order as described on the IRAS website, a claim equal to a pre-mandated percentage of your taxable income, can be made. If you make a claim for more than one child, your total claim will be capped at 100% of your earned income.

You can claim up to:

  • 15% of your income for your first child.
  • 20% of your income for your second child.
  • 25% of your income for your third and subsequent child, provided the total claim doesn’t exceed 100% of your earned income.

Note, the total cap under QCR/HCR and WMCR is S$50,000, wherein claims under QCR/HCR will be allowed first and the balance claim will be allowed under WMCR.

Have You Employed a Foreign Helper? Enjoy a Tax Exemption

If you’re a married woman, a divorcee, or a widow with school going children, you can claim a special tax exemption if you have employed a foreign domestic worker.

If you’re single or if you’re a married male, you can’t claim tax exemption under this scheme. You can become eligible for this scheme if you satisfy the following conditions:

  • You or your husband employed a foreign citizen as domestic help in the previous year.
  • In the previous year, you satisfied one of the following conditions:
    • You shared a household with your husband.
    • Your husband was not a Singapore tax resident during the period and didn’t enjoy tax benefits.
    • You had a dependent child and you were:
      • Serving a legal separation from your husband
      • Divorced
      • Widowed

How Much Can You Claim?

You can claim up to double the foreign domestic worker levy you paid in total on a domestic worker of foreign nationality. This exemption will be calculated on your earned income and can be claimed irrespective of whether you or your husband paid the levy. Check the IRAS website to know the amount of relief allowed for years of assessment 2014 to 2018.

The reliefs discussed have to be seen in the light of the fact that from the 2018 year of assessment, you can claim a maximum of S$80,000 in relief on your earned income.

Now that you have learned that you can enjoy a number of tax reliefs in a year of assessment and save big, why just stop there? If you start paying your taxes with the right credit card, you can enjoy greater savings in the form of rewards points, air miles, and more.

This article was written by BankBazaar.sg.

BankBazaar.sg is a leading online marketplace in Singapore that helps consumers compare and apply for a credit card, personal loan, home loan, car loan and insurance.

Feel you can save up even more thanks to these tax relief Singapore schemes? Share with your friends so they can save a few bucks!

 

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