Maximise Your Tax Savings with Singapore’s SRS: A Smart Move for Retirement and Tax Planning
- GordonGekko
- 1 day ago
- 2 min read
As the financial year closes and tax season approaches, many Singaporeans start exploring ways to optimise their income tax. One effective, yet often underutilised, tool is the Supplementary Retirement Scheme (SRS). This voluntary savings scheme not only helps you build retirement funds but also offers immediate tax relief — a win-win for those planning ahead.
What Is the Supplementary Retirement Scheme (SRS)?
The SRS is a government initiative that encourages individuals to save for retirement, on top of the compulsory CPF system. Unlike CPF, SRS is voluntary, and participants can contribute up to a certain cap annually to their SRS accounts with participating banks.
How Does SRS Help You Save on Income Tax?
1. Tax Deductibility on Contributions
SRS contributions are eligible for tax relief, meaning they reduce your chargeable income. The more you contribute (within the cap), the lower your income tax.
Annual Contribution Cap:
Singapore Citizens and PRs: Up to S$15,300 per year
Foreigners: Up to S$35,700 per year
Example: If your annual income is S$100,000 and you contribute S$15,000 to SRS, your taxable income is reduced to S$85,000 — leading to significant tax savings depending on your income bracket.
Here is an illustration of tax savings:
http://contributions.Data
2. Compound Growth Without Taxation
Investments made through SRS (e.g., stocks, ETFs, fixed deposits, unit trusts) grow tax-free, allowing your retirement savings to compound more efficiently over time.
3. Tax Benefits on Withdrawal After Retirement
Withdrawals made after the statutory retirement age (currently age 63) are 50% tax-exempt. Since most retirees fall into a lower tax bracket, this makes SRS an attractive tax-deferral and reduction strategy.
Important Considerations
Withdrawal Penalty: Early withdrawals (before retirement age) incur a 5% penalty and are fully taxed as income.
Investment Risk: SRS funds can be invested, so returns depend on your risk appetite and product selection.
Liquidity: Unlike CPF, you can withdraw from SRS anytime, but tax and penalties may apply unless it's for specific exemptions (e.g. death, medical grounds, or retiring from Singapore).
Who Should Consider Using SRS?
SRS is especially beneficial for:
Mid- to high-income earners looking for immediate tax relief
Self-employed or freelancers without CPF contributions
Foreigners planning to retire in Singapore but without CPF benefits
Individuals looking to build a flexible retirement portfolio
Getting Started with SRS
You can open an SRS account with any of the three SRS operators in Singapore:
DBS Bank
OCBC Bank
UOB
Once opened, you can start contributing any time before 31 December each year to qualify for tax relief in the following tax assessment year.
Conclusion
The Supplementary Retirement Scheme is a simple, effective, and flexible way to reduce your current income tax burden while preparing for retirement. Whether you are salaried, self-employed, or a foreigner working in Singapore, leveraging SRS can be a smart move — if you plan and invest wisely.
