Personal Income Tax amounted to $17.53 billion in 2023, accounting for nearly 17% of the Singapore government’s revenues. This is a significant source of income for the government, and the second-largest behind Corporate Income Tax.
Like many other countries, Singapore employs a progressive personal income tax system. The tax rate is divided into 12 tax brackets – a feature that ensures 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?
In Singapore, there are 12 income tax brackets from YA2024 (2 more compared to YA2023). The intention is to levy higher taxes on the highest-paid individuals. As you can see in the table below, those who earn $20,000 and below do not have to pay any income tax. According to the government, nearly 50% of workers in Singapore do not pay income tax.
You can also observe that the rates gradually increase the more a person earns. This tops out at 24% of income tax for those earning more than $1 million a year in YA2024.
Chargeable Income in YA2024
Income Tax Rate
Gross Tax Payable
First $20,000
Next $10,000
0%
2%
$0
$200
First $30,000
Next $10,000
–
3.5%
$200
$350
First $40,000
Next $40,000
–
7%
$550
$2,800
First $80,000
Next $40,000
–
11.5%
$3,350
$4,600
First $120,000
Next $40,000
–
15%
$7,950
$6,000
First $160,000
Next $40,000
–
18%
$13,950
$7,200
First $200,000
Next $40,000
–
19%
$21,150
$7,600
First $240,000
Next $40,000
–
19.5%
$28,750
$7,800
First $280,000
Next $40,000
–
20%
$36,550
$8,000
First $320,000
Next $180,000
–
22%
$44,550
$39,500
First $500,000
Next $500,000
–
23%
$84,150
$115,000
First $1 million
In excess of $1 million
–
24%
$199,150
24% of excess income
Source: Income Revenue Authority of Singapore (IRAS)
The 2 additional tax brackets, increasing income tax for the top earners in Singapore, was introduced during Budget 2023, and expected to raise Personal Income Tax revenue by $170 million for the government.
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 your income are taxed at a different rate.
For example, if you earn $80,000, you can see that you fall into the 7% tax bracket. However, you can also see that you only need to pay $3,350 in income tax. If you’re crunching the numbers on your own, 7% of $80,000 is $5,600 – but you’re only required to pay a lower amount.
This is because regardless of how much we earn, we also enjoy progressive taxes on our income. This means our first $20,000 will not be taxed at all. 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 2023
For those who earn $80,000 annually, this is how your personal income tax is calculated:
first $20,000 is taxed at 0%, and you pay nothing on it
next $10,000 is taxed at 2%, and you pay $200
next $10,000 is taxed at 3.5%, and you pay $350
next $40,000 is taxed at 7%, and you pay $2,800
That’s why you will end up paying only $3,350 in personal income tax. While you may fall in the 7% income tax rate bracket, your effective income tax rate is only 4.19%.
Here’s the effective rate that each person who earns the maximum within their income tax bracket.
Chargeable Income in YA2023
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%
First $500,000
$84,150
22%
16.82%
First $1 million
$199,150
23%
19.92%
In excess of $1 million
24%
You Only Pay Personal Income Tax On Chargeable Income
Going one step backward, 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. Not earned 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 $6,000 a month, or $72,000 a year, in 2023, our chargeable income will only be $57,600 as we have a 20% employee CPF contribution for those under 55. We are also not charged income tax for our employer CPF contributions.
In Singapore, there are also various 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.
Specifically for YA2024, the government has also extended a Personal Income Tax rebate of 50% (up to a cap of $200). This negates the first income tax bracket – for the lowest earners in Singapore. Effectively, anyone with a chargeable income of $30,000 or less does not have to pay any income tax.
For example, if we are below 55 and earned $38,500 during the year, we will not have to pay any income tax in YA2024. This is because our mandatory CPF contributions of $7,700 during the year is not chargeable. We will also be eligible for the Earned Income Relief of $1,000. This means our chargeable income will be $29,800 – and will not have to pay any income tax after taking into account the Personal Income Tax rebate in YA2024.
Beyond this, we also lower our income tax bracket if we qualify for other personal income tax relief, rebates or deductions. The personal income tax relief cap is $80,000 for each year of assessment.
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
This article was first published on 23 March 2020 and updated to include the latest information for YA2024.
The post Complete Guide To Personal Income Tax Rates And Income Brackets In Singapore appeared first on DollarsAndSense.sg.
