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Ways to reduce income tax.

Thursday, May 23, 2013

On 8 March 2013, I blogged about how we could pay less in income tax even as we increase our income. 

So, what can we do to achieve this?

1. Invest to receive non-taxable income.

2. Start a Supplementary Retirement Scheme (SRS) account and make annual contributions to reduce taxable earned income.

3. CPF-SA Top Ups will receive income tax relief for the first $7K contributed each year.

4. Voluntary contribution to our CPF-MA will receive income tax relief.

5. Donate to charitable organisations recognised by the government and enjoy 2.5x tax deduction, if we can afford to do so.

The rather generous personal income tax rebate from the government helped me to save 30% in tax payable. 

For seniors who are still working, the rebate is 50%.

So, how much is my income tax for the Year of Assessment 2013?

S$ 1,133.23.

This is probably the lowest I have ever paid in income tax in the last 10 years. 

This is even though my total income for 2012 exceeded S$200,000.

What I have done is humanly possible. 

Compared to many big success stories in Singapore, what I have achieved is not fantastic. 

Unless disadvantaged in some way, anyone who is determined enough can do it too. 

Remember if Yan can cook, so can you?

It is 100% possible to make more money and pay less income tax and there are readers who have been following my blog since its inception who can attest to this. 

If you have experienced this for yourself, please leave a comment and share with us your story.

Of course, there are many ways to pay less income tax and, mind you, I am referring only to the legal ones. 

Nothing illegal here in ASSI. 

Read the comments contributed by readers in my earlier blog post on the topic (hyperlink provided below) and we will get some ideas.

Believe or not to believe?

Related post:
Make more money, do good and pay less income tax.


Unknown said...

Hi Ak,

Just like to know, the dividends you received from the reits and other shares, are they taxable? Need to declare voluntarily?

Also, have been following your website for a while, are there a list of stocks/shares that currently you holding that you are comfortable to share with us?

Thank you for your kind sharing.
Best regards,
Jingle Bell

AK71 said...

Hi Jingle Bell,

This is the website you need:
IRAS: Dividends.

As for what I am invested in, I think this is where you do a bit of work and comb my blog. ;)

Kelvin said...

Hi AK71,

How come you are comfortable sharing with us your earned income ^^ LOL. Thought it should be confidential, anyway it seems like the dividends from your investments are more than 2x your earned income. Well done. *Pats your shoulder* Have to learn more from you ^^

AK71 said...

Hi Kelvin,

I have not disclosed my earned income. I have only disclosed my chargeable income. Not the same. ;)

Mad Stranger said...

Hi AK71,
You must have donated a large portion of your income this year. I am guessing it is around a 5 digit figure. =)

Any idea what is the cap on the donations relief yer year?

AK71 said...

Hi Mad Stranger,

I did make more substantial contributions to charities last year.

There are many good charities out there and if we can afford to help, we should. There will always be people who have been dealt a bad hand of cards in life and the most helpless ones are children. So, a favourite charity of mine is Singapore Children Society.

I don't think there is a cap to tax relief on our donations. :)

Singapore Man of Leisure said...

Hello AK,

Respect and well done!

And I am not referring to how much you've earned or how you've saved on your income tax ;)

We are here and then we are gone. Along the way, if we can bring a smile to another person, our time here has not been in vain.


AK71 said...


Unexpectedly, this blog post has drawn attention to how much in donations I might have made last year to charities. Paiseh. This wasn't my intention.

I would like to help more people but I have been taken advantage of and even cheated so many times that I have become very wary.

Helping the needy via recognised charities isn't perfect either, I know but if we stop believing everyone, then, what would happen to the less fortunate?

Recently, I have been wondering about my purpose in life and if not for the fact that I have my parents, siblings and niece, I might consider monkhood. :)

Unknown said...

Hi AK,
Family relationships are important. From your blog, I can feel that you are in good harmony with them. Treasure them.:)

Thank you for the Link.
Yes, did combed your blog but could not find your much older posts like those in 2009/2010/2011(no archives). The only ones are those you have posted and perhaps the links at the end of the post.
Maybe you can direct me. :)

Also, I am still learning,could you share your investment approach. After you have invested, say CMZ at 1.025/0.97 were you tempted to sell at 1.07 when it moved up or you will hold till your expected intrinsic value?

Thank you.

AK71 said...

Hi Jingle Bell,

My relationship with my family members is as harmonious as naturally possible. There will be squabbles and we have our idiosyncracies but blood is still thicker than water. ;)

Direction to my blog archives? It is at the bottom of the left sidebar. It doesn't really shout out for attention, I know.

My investment approach? I am really a hybrid. I use FA and I use TA. I am an investor and I am also a trader. I am a mess!

Go to the right sidebar and look for blog posts in the section labelled "My methods and philosophy" if you are still interested in learning how I turned out to be a mess. ;p

Finally, I believe that CMZ has much potential and its growth trajectory suggests that its stock is worth much more.

True value investors would say that people invested in CMZ are not investors and are more like speculators.

I am not overly concerned with how I am labelled. :)

Unknown said...
This comment has been removed by the author.
Unknown said...

Hi uncle AK,

I've been reading your blog for some time now. Like you I do have a hefty total income ($140k). After all deductions, my chargeable income comes in at $20k+, for a total tax payable of $27.06! ;D

AK71 said...

Hi Matthew,

Wow! That is good news! :)

It is also possible not to have to pay any income tax too, of course, especially for people who have retiree parents and very young children. Lots of tax reliefs.

It is amazing! :)

Unknown said...

Hi AK,

Yup, a bit of miscalculation there. If not I wouldn't need to pay anything to garment

AK71 said...

Hi Matthew,

Have a baby this year and next year you will not be paying any income tax! Not too late. ;)

AK71 said...

My total income for 2012 exceeded S$200,000. It is 100% possible to make more money and pay less income tax (legally).

AK71 said...

On my FB wall:

PK Jan says...

Is it bcos bulk of your income are from stocks which is not taxable?

My annual income from employment was at least 20% less but paid 10x your tax amount 😭

AK71 said...

What matters to me here is how much income we receive and how much income tax we have to pay on a personal level.

AK71 said...

Reader says:
Is still worth it to park money in SRS yearly, if the tax relief is cap at $80000. My wife just realised that her kids relief she received exceeded the $80000 max cap.

AK says:
If you don't get any income tax relief, don't bother with the SRS. I know I won't.

AK71 said...

Elaine Keh says...
What tax relief can we get if one hit the annual contribution through mandatory contribution?

AK says...
Your CPF mandatory contribution automatically gets income tax relief.
If you want more tax relief, consider topping up your CPF SA. First $7,000 top up per year will get tax relief.
You could also consider starting a SRS account for more tax relief.

AK71 said...

Seah Chen Yang says...

Just to add, personal income tax relief cap is at $80,000.

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