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Double your income but not double your income tax.

Saturday, May 17, 2014

This new blog post has an old theme and that is how we can pay less income tax even as we increase our income.

I have received my income tax notice of assessment. 

Tax payable: 


This is much more than what I paid last year which was $1,133.23. 

About 41.7% more, in fact! 

Why is this so? 

It has to do with the missing generous income tax rebate which was given in the year before.

Well, considering that my income in 2013 was almost twice as much as my income in 2012, $1,606.02 is not too much to pay, I suppose.

How is such a low income tax possible? 

After all, someone who makes $250,000 per annum would very likely have to pay an income tax of more than $20,000, wouldn't he?

OK, regular readers can skip the following pointers but if you are new to my blog, here are a few things you can consider doing:

1. Invest to receive non-taxable income. 

(For those who have the temperament and the know-how, trading could make some good money too.)

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

(For those who have yet to max out their CPF-SA, consider voluntary contributions up to a maximum of $7,000 a year. To avoid confusion, this is called a Minimum Sum Top Up or MSTU.)

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

Mystery is solved.

The tools to help us build our wealth are out there and if we are able to help the less fortunate in the process, we should do it.

Don't say we don't have enough money or are not wealthy enough to help the poor. 

If we have some spare money to invest in the stock market, we are more fortunate than many out there. 

Even a $50.00 donation can do wonders. 

Not a big sum to most of us but it could mean a lot to the needy. 

If you don't know where to start, here is a suggestion: Singapore Children's Society.

Everyone's life should be better. 

If we do the right things, everyone's life could turn out better. 

Paying less income tax even as we increase our income will certainly help.

Reference: IRAS income tax rates.

Related posts:
1. Make more money, do good, pay less tax.
2. Ways to reduce income tax.
3. Voluntary contributions to CPF.
4. SRS- A brief analysis.
5. Build a bigger retirement fund: CPF-SA.


AK71 said...

"Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something."

Charlie Munger

Casey said...

Hi AK,

Dividend from REIT is not taxable? Do not need to declare?


AK71 said...

Hi Casey,

Income distributions received from S-REITs are not taxable.

All dividends received from our investments in the stock market are automatically captured by the IRAS as long as the stocks are in our CDP accounts. There is no need to declare. :)

Destiny said...

With annual income of>$200K, after all reliefs & SRS, the tax bill will still be hovering close to $20K.

Can you elaborate how you manage it to within $2K?

AK71 said...

Hi Destiny,

Clue: My annual income is more than $200K but my annual earned income is not.

See the 3 pointers in this blog post on how this could be achieved. ;)

test said...


ur post had spur me to make a donation to the needy...i have chosen Children's Cancer Foundation

my donation amt may not be big, but hope its of some help to them

AK71 said...

Hi test,

I made a donation to cancer stricken children a few years ago. A good cause, I am very sure. :)


Gah said...


I personally dislike Singapore Children's Society.

Here are the hard facts why :

1. They have 14 MILLION in INVESTMENTS. Usually these kind are not very liquid kind. SO are they a CHARITY HELPING NEEDY or an INVESTMENT FUND ???

2. They have assst of 67 MILLION DOLLARS. This is larger than even listed companies on Catalist.

3. They have high costs of raising funds at 3 million dollars. Seems they are good at employing marketing gimmicks.

I NEVER trust any charity that holds more than 5 million in long term assets. Too much chance for abuse when funds are not maximised.

Do look at sanctuary house charity instead. Think they need funding more than this kind of government linked charity.

AK71 said...

Hi Gah,

I am not in the position to reply on behalf of the SCS, of course, but I do not have anything against a charity that is able to grow its funds through investments per se. If it could become self sustaining, it could be a good thing.

Whether they employ marketing "gimmicks" or not, I don't know but I do receive regular appeals in the mail. Of course, I don't know if there is any abuse of the system.

Perhaps, you could send the 3 points you have made here to the SCS and ask them for clarification. It would probably be more enlightening if you are seeking answers. :)

I will take a look at Sanctuary House later and maybe include it in the list of charities which I make donations to. Thanks for the recommendation. :)

AK71 said...

The government will raise the tax deduction for donations made in this Jubilee Year from 250 per cent to 300 per cent, Tharman Shanmugaratnam, Deputy Prime Minister and Finance Minister, said on Monday.

It will also extend the 250-per cent tax deduction for donations, which was due to expire at the end of this year, for another three years to 2018.


AK71 said...

Wang Zhenbang:
Correct me if I'm wrong but while we earn tax relief through VC into MA and SA, there will come a time where we hit the ceiling and cannot earn tax relief anymore. This will result in us being propel to a much higher band of income tax rate. Question here is should we earn as much tax relief as early as possible, or should we earn it strategically to avoid moving into the high income tax bracket i.e. to reduce chargeable income just slightly before the next band. Any advice?

VC to MA and Top Up to SA. ;)
If we make more money, we pay more tax but our government wants us to build a retirement nest egg and thus the incentive to save. In the grand scheme of things, the tax relief is not the theme. I wouldn't worry about it. Thank you for contributing to nation building. ;)

AK71 said...

Jackson Yang:
Getting higher income job meaning paying higher tax... i prefer tax free income in 4-5 figures a year like AK from stock market... i like the idea of having free holiday from dividend. :p
... 5 figures income from dividend while paying only 3 figure of tax! Haha...

AK71 said...

Koon Hwee Tay says...
Actually there is tax on dividend. It is taxed at the corporate level already. Just no tax on capital gain.

AK says...
I was referring to having more income on a personal level and paying proportionally less income tax. I receive dividends and I don't have to pay tax on them. I am interested in the net result. :)

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