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Recently, there were several questions from clients in regards to the SRS scheme. We have therefore decided that our inaugural launch would feature this tax saving instrument available to you.
Saving on Taxes with New SRS Scheme – By Bob Oh
The Supplementary Retirement Scheme (SRS) was established on 1st April 2001 to encourage individuals to save for their retirement by offering tax incentives. The SRS is open to all Singaporeans, Singapore Permanent Residents (PRs) and foreigners who are at least 21 years of age. However the individual must not be a bankrupt or of unsound mind.
Each individual is allowed only one account. Individuals without any earned employment income in the previous year can contribute to the SRS in the current year.
Benefits
1.Claim tax relief for contributions made to the SRS.
2.Investment gains in the SRS are tax free with the exception of Singapore dividends received, which are taxable.
3.Tax will be payable only when SRS savings are withdrawn. If savings are withdrawn in its entirety upon retirement, only 50% will be subject to tax.
4.Withdrawals may also be staggered over 10 years to enjoy greater tax savings.
Making contributions
All SRS contributions are to be made in cash at any time before 31st December each year.
Capping
Singaporeans and Singapore PRs — S$11,475
Foreigners — S$26,775
What can I do with my SRS funds?
Funds in the SRS account may be invested in a range of financial products. For example,
fixed deposits
insurance products and unit trusts
single premiums with life cover of not more than three times the single premium will be allowed.
All proceeds from the realisation of SRS investments must be returned to the SRS account.
Where and how can I contribute?
You can contribute by opening an SRS account with any appointed SRS operator. All SRS contributions must be in the form of cash. Currently the appointed SRS operators are DBS, OCBC, and UOB.
Can employers contribute directly?
Employers can contribute to their employees’ SRS accounts, subject to the current SRS contribution limits, and claim full tax deduction. SRS members will enjoy tax relief on the contributions made by their employers.
That means it is part of employers expense but part of employee's remuneration.
See PDF file for calculation examples
What is it worth to you?
S$11,475 savings for 20 years @ 5% returns p.a. - S$393,050
S$11,475 savings for 20 years @ 10% returns p.a. - S$726,146
S$11,475 savings for 20 years @ 15% returns p.a. - S$1,431,735
S$11,475 savings for 20 years @ 20% returns p.a. - S$2,973,605
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About Me
- Bob
- I don't have much of a personality and am normal as can be. In my job, I can't be loud or strange...but I guess, I am not like that too!
Disclaimer
The author of this blog/website shall not be held liable in any way for its contents. The author expressly disclaims all liability, to any person, entity, body or organisation, for all loss or damage of any kind whatsover, whether direct, indirect or consequential, in respect of anything done or omitted to be done, whether wholly or partly, in reliance upon the whole or any part of the contents and/or materials within this blog/website. This blog provides the information for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers (CPA, LLB etc). Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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