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Complete Guide To Personal Income Tax Brackets In Singapore [2021 Edition]

Your effective income tax rate will always be lower than your income tax bracket.

This article was first published on 23 March 2020 and updated to include the latest information for 2021.

In 2020, Personal Income Tax amounted to $12.8 billion or almost 20% of Singapore’s total operating income of $64.6 billion. This is a significant source of revenue for the government, and the second-largest behind Corporate Income Tax.

Read Also: The Government Intends To Spend $105.6 billion In Budget 2020. Here’s Where The Money Is Coming From

Like many other countries, Singapore employs a progressive income tax system. Tax brackets are an important part of this system to ensure that those who earn more don’t just pay more, but also pay a larger portion of their income.

This is very different from how Corporate Income Tax works, which is a flat 17% in Singapore – regardless of how much or little profit a company generates.

Which Income Tax Bracket Do You Fall Within?

How much you end up paying in income tax is largely dependent on the income tax bracket that you fall into.

In Singapore, there are 10 income tax brackets. As you can see in the table below, those who earn $20,000 and below do not have to pay any income tax at all. You can also observe that the rates gradually increase the more a person earns. This tops out at 22% of income tax for those earning more than $320,000 a year.

Chargeable Income Income Tax Rate Gross Tax Payable
First $20,000
Next $10,000
First $30,000
Next $10,000

First $40,000
Next $40,000

First $80,000
Next $40,000

First $120,000
Next $40,000

First $160,000
Next $40,000

First $200,000
Next $40,000

First $240,000
Next $40,000

First $280,000
Next $40,000

First $320,000
In excess of $320,000

22% of excess income

Source: Income Revenue Authority of Singapore (IRAS)

Calculating Your Effective Tax Rate

While many people may think they are taxed at their personal income tax bracket, the reality is that different tranches of a person’s income will be taxed at a different rate.

For example, if a person earns $80,000, he or she will fall into the 7% tax bracket. However, the person only needs to pay $3,350 in their income tax. If you calculate 7% of $80,000, it is actually $5,600.

This is because regardless of how much we earn, our first $20,000 will not be taxed. Similarly, our next $10,000 will be taxed at 3.5%, and so on. Hence, your effective income tax rate will always be lower than the income tax bracket that you fall within.

Read Also: Complete Guide To Filing Your Personal Income Tax In 2020

For those who earn $80,000 annually, this is how their personal income tax is calculated:

  • first $20,000 is taxed at 0%, and they pay nothing on it
  • next $10,000 is taxed at 2%, and they pay $200
  • next $10,000 is taxed at 3.5%, and they pay $350
  • next $40,000 is taxed at 7%, and they pay $2,800

Hence, the person has to pay $3,350 in personal income tax. While their income tax rate bracket may be 7%, their effective income tax rate is 4.19%.

Here’s the effective rate that each person who earns the maximum within their income tax bracket.

Chargeable Income Gross Tax Payable Income Tax Rate Bracket Effective Income Tax Rate
First $20,000 $0 0% 0%
First $30,000 $200 2% 0.67%
First $40,000 $550 3.5% 1.38%
First $80,000 $3,350 7% 4.19%
First $120,000 $7,950 11.5% 6.63%
First $160,000 $13,950 15% 8.72%
First $200,000 $21,150 18% 10.58%
First $240,000 $28,750 19% 11.98%
First $280,000 $36,550 19.5% 13.05%
First $320,000 $44,550 20% 13.92%
In excess of $320,000 22%

You Only Pay Personal Income Tax On Chargeable Income

Going one step backwards, before we even consider our income tax rate bracket or calculate our effective income tax, we need to understand that we only have to pay income tax on chargeable income.

First and foremost, we do not have to pay personal income tax on our CPF contributions. This means that if we earn a salary of $5,000 a month, or $60,000 a year, in 2019, our chargeable income will only be $48,000 as we have an employee contribution to CPF of 20% of our income for those under 55. We are also not charged income tax for our CPF contribution component from our employer.

In Singapore, there are also many tax deductions for individuals you may qualify for. One relief everyone qualifies for is the Earned Income Relief, for those below 55, the Earned Income Relief is $1,000, for those 55 to 59, the Earned Income Relief is $6,000, and for those 60 and above, the Earned Income Relief is $8,000.

For example if we are below 55 and earned $81,000 during the year, we can claim an Earned Income Relief of $1,000, among other applicable reliefs. Apart from just reducing how much we have to pay in personal income tax, we also lower our income tax bracket from 11.5% to 7%.

This can be significant depending on the personal income tax bracket you fall in and how much deductions you can claim. The personal income tax relief cap is $80,000 for each year of assessment.

Read Also: 6 Ways You Can (Legally) Reduce Your Income Tax For YA 2020

If you’re still unsure how much you have to pay in taxes, you can use this calculator from IRAS to compute your income tax liability. You can also determine the deductions and reliefs you qualify for to ensure you don’t end up paying more than necessary in taxes.

Read Also: Here’s What Happens If You Don’t File Your Taxes On Time In Singapore

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