How to save on income tax in Singapore?
In this video I am going focus on how to save tax using Supplementary Retirement Scheme (SRS) for short.
What is SRS (Supplementary Retirement Scheme)?
SRS is the Supplementary Retirement Scheme which is an account that an individual can open voluntarily to save for retirement over and above CPF savings.
What are the benefits of contributing to SRS?
The benefits of contributing to SRS are that all contributions are eligible for tax relief and investment returns are tax-free before withdrawal.
Only 50% of withdrawal are subjected to tax during retirement.
In this video I will share a case study of the amount of tax someone will save by contributing to SRS.
Maximum Contribution to SRS
The maximum SRS contribution for Singaporeans and Singapore PRs is $15,300 and $35,700 for foreigners.
Disadvantage to Contribution to SRS
If withdrawal is taken place before 62, 100% of withdrawn monies are subjected to tax and a 5% penalty.
However, on special circumstances, it will be penalty free if withdrawal is before age 62.
SRS Withdrawal Strategy
In this video, I will share on 3 scenarios on how different withdrawal strategies will affect the amount of tax to pay.
Who should contribute to SRS?
Due to the cap of income tax relief of $80,000, this might not benefit an individual if he or she has reached the maximum income tax relief.
The key to contributing to SRS is to see how someone can drop down their income tax bracket in order to save tax. And the amount of tax saved will depend how much their income and the personal reliefs they are entitled.
How to use Tax Calculator?
I will be showing you how to download tax calculator from IRAS and how to use it.
When to open SRS?
Currently withdrawal will be at age 62 and for next year, the withdrawal age will increase to 63 and it will keep increasing to 65 or even 70 by 2030. So the best time is to open this year before year end.
Interest Rates of SRS Account
Assuming you are convinced to open the SRS account and make contributions but do you know what is the interest rate of the account? It is only 0.05%! So pls open the account and put the money in some financial instruments.
Options for Higher Returns
By having an investment portfolio or retirement plans like single premium endowments or annuity plans will give higher returns than leaving them in the SRS account.
How to open SRS account?
Just go online to open an SRS with any of the 3 local banks
SRS in a nutshell
A summary of how SRS can benefit you to save tax is shared.