In Singapore, the Central Provident Fund (CPF) is a mandatory social security savings scheme that serves as a retirement fund for employees. CPF contributions are made by both employers and employees and are meant to provide financial security during retirement. Additionally, CPF contributions can be claimed as a tax relief, reducing an individual’s taxable income. This article will guide you through the process of contributing to CPF and claiming tax relief in Singapore.
Step 1: Understand the CPF Contribution Rates
CPF contributions are made up of two components – the employee contribution and the employer contribution. The contribution rates depend on the employee’s age and whether the employee is a Singaporean or a Permanent Resident. The table below shows the contribution rates:
|Age Group||Employee Contribution Rate (% of Monthly Wage)||Employer Contribution Rate (% of Monthly Wage)|
|Up to 55||20||17|
|Above 55 to 60||13||13|
|Above 60 to 65||7.5||9|
Step 2: Check Your Eligibility for Tax Relief
To claim tax relief for CPF contributions, you must meet the following criteria:
- You must be a tax resident in Singapore.
- You must have made CPF contributions in the same year of assessment that you are claiming the relief.
- The CPF contributions that you are claiming must not have been withdrawn before the end of the year of assessment.
Step 3: Make CPF Contributions
Employees can make CPF contributions through their employers. The contributions are automatically deducted from their monthly salary and are credited to their CPF account. Self-employed individuals can make contributions to their own CPF accounts. They can do so by logging into their CPF account on the CPF website or visiting a CPF service centre.
Step 4: Claim Tax Relief
To claim tax relief for CPF contributions, you must include the amount of CPF contributions made in the same year of assessment in your tax return. The tax relief is capped at $37,740 per year for Singaporeans and Permanent Residents aged 55 and below. The cap is lower for older individuals. The table below shows the cap for tax relief:
|Age Group||CPF Relief Cap (Per Year)|
|Up to 55||$37,740|
|Above 55 to 60||$30,720|
|Above 60 to 65||$22,980|
Step 5: Submit Your Tax Return
After including your CPF contributions in your tax return, you must submit it to the Inland Revenue Authority of Singapore (IRAS). You can do so online through the myTax portal or by mail.
In conclusion, contributing to CPF is a great way to save for retirement while also reducing your taxable income. By following the steps outlined in this article, you can contribute to CPF and claim tax relief in Singapore.