7 Ways to Reduce Income Tax

Save More on Tax in Singapore

Imagine the year coming to a close and at the end of it you have a steep tax bill. Now paying taxes is inevitable, but wouldn’t you like to know if there is some way to reduce the tax burden? Here are 7 ways you can reduce your taxes (legally) and keep more of your earnings with you. You’ll have an extra little bit that could pay for a holiday abroad or could enhance your retirement fund.

1. Deductions for Employees

Say you have spent money in the process of earning your income. Perhaps you travel to work or you need to pay for entertainment expenses. You could claim employment expenses if the expense is allowable.

Here are some of the conditions that need to be satisfied to qualify your expense as allowable:

  • You incurred this expense while performing your work.
  • Your employer did not reimburse the amount.
  • The nature of your expense was not private or capital.
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2. Deductions for Partners, Sole-Proprietor or Self-Employed Individuals

While running your business there are certain costs you are bound to incur. Knowing what you can claim deductions for can help reduce your tax liability and save you a few dollars.

You may claim tax deductions if you incur expenses to improve or enhance your business. For instance, if you need to repair or replace equipment or machinery. You also could claim tax deductions if you pay for R & D expenses.

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3. Deductions for Expenses on Rental Properties

Do you earn an income from a property you own? Well, if you spend money on repairs for that property you could be eligible for a tax deduction. However, you need to bear in mind these two factors:

  • You should have incurred this expense while generating rental income from the property.
  • You also should have paid for these rental expenses during the duration you had tenants at your property.
Calculate & Save Tax on Rental Income

4. Deductions for Donations

Did you know that you could claim a deduction up to 3 times the amount of a donation you make? Yes, it does pay to be kind.

For donations made between 2009 and 2021, you could be eligible for a tax deduction. Your donation could be cash, computers, shares, land or buildings, artefacts, or works of art and sculptures that are to be displayed publicly.

You will need to make your donation to the Singapore government or an Institution of a Public Character (IPC). Only if you make your donation to an approved IPC will it qualify for tax deduction.

Learn More Tax Deduction Schemes for Donation

5. Deduction for Angel Investors

As an angel investor, you could claim tax deduction if you invest in a qualifying start-up firm. You should invest at least S$100,000 in an eligible company within a year from the day you first invested in the firm. You also have to keep your money invested for a continuous period of 2 years.

Learn More About Angel Investor Scheme

6. Non-taxable Deposits

If you make deposits in licensed financial companies or approved banks, the interest you earn from them will not be taxable. Even interest earned from bonds won’t be taxable. However, if the interest from the bond is earned from a partnership based in Singapore, it will be taxed. If you have earned non-taxable interest, you don’t have to declare it.

Interest that is Taxable:

  • Deposits made at non-approved banks.
  • Deposits made at financial firms in Singapore that are not licensed.
  • Loans to persons or companies.
  • Interest you earn from refunds of excessive employee CPF contributions.
  • Interest earned at pawnshops.
  • Debt securities that earn interest from partnerships based in Singapore or which earn interest while trading in debt securities.

If you have any form of taxable interest, you have to declare the complete amount under “Other Income” while filing your taxes.

Learn About Taxes on Inmcome Earned from Investments

7. Tax Rebate or Relief

Tax reliefs and rebates help you save more of your money based on what you qualify for. You need to be a Singapore tax resident to be eligible. Some of the ways you can save on tax relief are:

Final Note

If you are planning to claim tax relief, you should know that from 2018 onwards there is a cap on income tax relief of S$80,000. You may or may not be affected by this, but there are several schemes offered where you can still save on your tax bill. However, this cap only applies to tax reliefs. You can still be eligible for rebates and other tax deductions. You can utilise the steps above to take full advantage of the tax-saving opportunities and keep more of your hard-earned income.


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