It is the time of the year when we complain about why we need to pay taxes and grumble about how little we make. Nonetheless, we still have to go through the motion of tax filing. It is always good to do it ourselves to better understand our earnings capabilities and potential tax savings we can obtain.
Step 1: Log on to our IRAS account (link here)
Step 2: Look for the “Individual” tab and click on “File Form B/B1”
Step 3: We will land on the site where we key in our uncaptured income and personal reliefs
This is a very important part of the tax filing process as you would need to confirm on your employment income for the year. If you are like us salaried workers, you do not have to worry much because your employer should have already submitted your income to IRAS on your behalf.
Identifying your income is important because this sets the basis of our taxes. The more we earn, the more taxes we should expect to pay. This page also allows us to declare other income such as dividends, interest and rental income from property. Those of you who are earning passive income from your investments will need to declare your earnings here. Dividend income is not be taxed under Singapore’s one-tier corporate tax system, and interest received from deposits with approved banks/licensed finance companies in Singapore is not taxable.
As responsible citizens, we should not try to underreport our earnings for the year. If the taxmen find out we did not report our earnings properly, we are in for trouble. So just report our earnings and we will do just fine in Singapore.
[Click on the hyperlinks to determine what each “Other Income” meant. (1) Dividends, (2) Interest, (3) Rent from Property, (4) Royalty, (5) Charge, (6) Estate/Trust Income, (7) Gains or Profits of an Income Nature.]
The above example assumes that the individual is a male, Peter, age 32, earns $3,500/month and pays $2/month to an approved charitable organization. His annual wage would be $42,000, however due to the 20% contribution to CPF, his taxable income is reduced to $33,600. The $60 approved donations come from the 2.5x tax relief for every dollar donated ($2 x 12 months x 2.5).
Step 4: Report tax reliefs (Important to maximise tax reliefs)
Earned income relief: This is basically a reward for being a Singapore citizen. We are given $1,000, $6,000 and $8,000 tax deduction for those age below 55, between 55 and 59 and above 60 respectively.
In this case, Peter at 32 years old has a $1,000 tax deduction from earned income relief.
Spouse/handicapped spouse relief: As we try to move towards an inclusive society, we are given tax deductions for a spouse who is unemployed or are fulltime house-husband/wife and handicapped partner. Our assumption here is that Peter and his wife are both working full-time jobs and hence he receives no tax relief in this aspect.
Qualifying/handicapped child relief: To put it simply, our government is encouraging us to contribute to population growth using tax deductions. We will get $4,000 for being a parent to every child. Handicapped children will have more relief of $7,500. Peter and his wife have two children and he therefore enjoys an $8,000 tax deduction.
Working mother’s child relief: Again, an incentive by the government for working mothers. The working mother gets 15% of earned income in tax relief for the first child, 20% additionally for the second child and 25% for subsequent children. This relief is capped at 100% of the mother’s earned income. Peter’s wife will get 35% (15% + 20%) of tax relief, but he does not enjoy this benefit.
Other inclusive reliefs: Parent/handicapped parent, grandparent caregiver relief and handicapped siblings’ relief are all part of our government’s plan to make Singapore an inclusive society. We can get $5,500 to $14,000 for parent/handicapped parent relief, $3,000 for grandparent caregiver relief and $5,500 for each handicapped sibling in tax deductibles. Peter has both his able-bodied parents staying with him, he is therefore entitled to $18,000 ($9,000 X 2) parent relief.
Other types of reliefs: Here we can obtain tax relief for courses that we took, maid levy relief and CPF cash top-up scheme. All of these reliefs can further reduce our taxable income. Peter took a course that cost $800 to enhance his current skills. He also served his reservist for the year as a non-key appointment holder which entitles him to a $3,000 tax deduction.
In total, Peter receives a $23,800 tax deductible. Which results with a $9,740 taxable income.
Step 5: Conclude taxation for the year
Peter need not pay a single cent of taxes as the minimum taxable income is $20,000. Once we have concluded our tax filing, we can submit it to IRAS and wait for the confirmation from them soon.
Tax rates for 2017 – Just in case we do not know the latest taxation rates
The deadline for income tax submission is 18 April 2017 so remember to get it done before it’s too late.
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