The whirlwind of 2020 has shaken up the environment of the world. A vital sector of financial analysis is to know about the reduction of income taxes. Deduction of income tax is at the top of our mind, and there are ways to do so.
An essential disclaimer about income tax is that for the tax period 2020, you will only pay tax for the income earned in the year 2020.
Taxes are the resource for building a nation in Singapore. During the finalization of Budget 2020, the Deputy Prime Minister and Finance Minister of Singapore announced its support measure to Singapore’s people. The primary reason to do so is that businesses and families need aid to combat COVID-19.
There is a checklist to follow, including information, facts, and details before filing the tax.
5 Ways to Reduce the Income Tax
There are majorly five peaceful ways to save money on personal income tax. If you follow this guide, there will be no problem to face.
1. Support your Account or Supplementary Retirement Scheme (SRS):
In Singapore, there is an opportunity for all the Singaporeans and all the P. Rs to contribute more than$15,300. As for the foreigners living in Singapore, they have the limit to contribute approximately $35,700. The support Supplementary Retirement Scheme provides is eligible for tax relief. In the future, these contributions will be for investment after your retirement.
2. Chip in the CPF Special Account (S.A.) Willingly:
The amazing fact of CPF Special Account is that it chips in to appreciate dollar-for-dollar tax relief. For yourself, this tax relief has a limit of $7,000. If you want to contribute another $7,000 for the Special Account of your loved one: the condition applies if there is a possibility of lowering the taxable revenue by $14,000.
What’s More: All the money deposit in your CPF Special Account receives an interest rate of 4% P.A.
3. Contribute to your Medisave Account Voluntarily:
Like a Supplementary Retirement Scheme Account is eligible for Tax Relief, similarly, whatever contributions you are making in your Medisave Account, they are also suitable for tax relief. The condition provided for this situation is that you have not met the criteria list of your Basic Healthcare Sum (BHS). The money you are saving in Your Medisave Account is helpful for all the offset medical bills. Like, CPF earns 4% P.A.; similarly, a Medisave account also earns 4% P.A.
4. For the Approval institutions, Make Donations:
The Singapore Government has provided all the relief of income tax for its residents. If you have qualified donations until 31 December 2021, you can enjoy a 250% tax deduction. You can make these donations in all ways like computers, cash, shares, and more.
5. Register for an Eligible Course:
This way has so many opportunities as it will allow you to enjoy the course fee relief for more than $5,500 each year. Another possibility is that this course will help you in upgrading your skills and talent. The third opportunity is that it will increase your employability, A win-win for all the Singaporeans!
Who is eligible to pay income tax in Singapore?
If you are generating revenue in Singapore, then you are eligible for paying income tax. However, there are a classified group of people who need to pay income tax
Individuals Earning in Singapore: As we have already discovered, anyone generating revenue is eligible to pay income tax.
Individuals Earning via Business in Singapore: All the Self-employed people in Singapore who are deriving their income with the help of their business are eligible to pay income taxes.
Individuals Earning via Investments in Singapore: If any individual is deriving income from investments in property, shares, and even fixed deposits, they need to pay income tax.
Individuals Who are Working Outside Singapore: There are three possibilities for this point:
o Any individual whose foreign employment has a link with their Singapore employment,
o Individuals who are working outside Singapore, especially on behalf of Singapore’s Government,
o Any Individuals who are receiving income through any partnership in Singapore is eligible for income tax
Individuals are Receiving an Income but not Working: A tricky point as these incomes can come from investments, Part-time individuals, Pension, royalty income, and more.
The Deadline to File the Income Tax in 2020
Before the outbreak of CIVD-19, the date to file the income tax is:
5 April for all the Paper Filing Process
18 April for E-Filing if you are doing it online
However, in 2020, things have changed because of the pandemic, as Singapore’s government is doing everything to bring easiness for the Singaporeans. The date for filing the tax extended to 31 May 2020. After filing the income tax, you will receive a copy of the tax bill in which there is a knowledge of how much tax you will have to pay for Y.A. 2020. You will receive an SMS, or you can view it online for your ease.
If you are Late to File the Case, then What Happens?
The first step is that IRAS will start the process if you fail to file the tax before 31 May 2020.
There are three steps of the process which IRAX will take care of:
1. Impose a fee for late filing, but does not exceed from $1,000,
2. Issuance of an estimated NOA (Notice of Assessment) and,
3. Subpoena you to Court.
There are also certain situations like IRAS may issue an expected NOA. In the NOA, your past years’ income data has the details as following:
Start with the date of the NOA. You must pay the income tax within one month.
You can file your tax return, and you must process this step immediately. After the revision of the approximate assessment, your additional tax reimbursed sooner.
You can also use your credit card for paying income tax, but the credit card does not include tax payments done by credit cards.