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How to reduce your personal income tax in Singapore
By James Yeo
The time has come again to file your individual income tax returns – and the April 18 deadline is just around the corner. That said, under the No-Filing Service (NFS), many taxpayers have been informed that they are not required to file a tax return.
However, that does not mean you are not required to pay any taxes. It simply means that your tax bill will be computed automatically based on your auto-included income (submitted by your employer) and previous year’s relief claims, which may be adjusted if you do not meet the eligibility criteria.
With that, I believe that one should always file your own taxes to take advantage of potential tax savings. Here are a few tips on how you can reduce your income taxes legally.
1) Claims from your day job
One often overlooked tax relief is the employment expenses incurred in earning your salary. In layman terms, you are eligible for deductions if you have used your own money to pay for expenses essential to your employment such as travel expenses, entertainment expense, subscriptions, etc.
Some examples given by IRAS include:
Entertainment expenses incurred in entertaining clients
Mosque building fund, zakat, fitrah or any other religious dues authorised by the law
Subscriptions paid to professional bodies or society for professional updates, knowledge and networking
Travel expenses incurred on public transport, such as buses, trains, or taxis
Another important note is that you would have to keep proper records of the expenses incurred for a period of five years. These records must be supported with invoices, receipts, vouchers, and other documents.
2) Grandparent Caregiver Relief
Many people are aware about the common Parents’ relief or the Working mother’s child relief (WMCR). However, a quick check with my friends with kids reveals that they are unfamiliar with the Grandparent Caregiver Relief (GCR), often due to a lack of understanding of how it works.
The GCR is granted to working mothers who engage the help of their parents, grandparents, parents-in-law or grandparents-in-laws (including those of ex-spouses) to take care of their children. You can read more about it here.
And there is more: Assuming your mother is a housewife who helps to take care of your children, you are able to claim both Parent Relief and GCR on your mother if you meet the qualifying conditions.
3) Tap on the various Child Reliefs
Many government schemes, such as the Baby Bonus and childcare subsidies, are available to help parents defray the high costs of bringing up kids in Singapore. On top of that, parents can also tap into the various tax reliefs meant for families supporting their children, like the parenthood tax rebate and working mother’s child relief.
That said, one of the more overlooked tax schemes is probably the Qualifying Child Relief (QCR). Let me show you why.
Many parents harbour the notion that they are not entitled for the Qualifying Child Relief once their kids cross the 16-years-old boundary or start working part-time. That is not true! According to IRAS, having an unmarried child who is studying full-time at any educational institution and who does not have an annual income exceeding S$4,000 in the taxation year, qualifies you to claim the QCR. This means that you are eligible for the relief even if your kid is 24 years old studying in University or even working part-time for some pocket money (but not exceeding 4 grand). For more information, you can visit the link here.
4) Course Fees Relief
Last but not least, don’t forget to seize the course fees’ relief if you have been upgrading your skills or furthering your studies. You can defray all the related costs like the examination fees and tuition fees, too.
However, one has to note that courses which do not enhance your employability are not eligible for any relief. This includes programmes taken for leisure purposes or general skills, such as photography, basic computer courses, etc. It also doesn’t apply to those who are studying and have not worked previously.
Conclusion
The few tips mentioned above are not exhaustive. In fact, it would be wise for you to visit the IRAS website for a whole list of other reliefs to reduce your personal income taxes.
Don’t forget to file your taxes before April 18!
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