3 ways to reduce your income tax through CPF & SRS top-ups
Endowus Insights

3 ways to reduce your income tax through CPF & SRS top-ups

June 23, 2022
December 27, 2019

We Singaporeans are well known to be cautious with any form of spending, so it is no doubt that income tax relief and tax savings will always be on the top of our mind.

Fortunately for working Singaporeans and permanent residents, CPF, the compulsory savings and pension plan and SRS, the voluntary retirement saving scheme, grant you ways to reduce taxable income through CPF or SRS contributions.

CPF top-up methods that give you income tax relief:

There are many ways you can top up your CPF contribution, however not all can be tax deductible to reduce your taxable income. Do note that the tax relief methods recommended below are constrained by the maximum personal tax relief of $80,000.

1. Topping up your parents'/ spouse's CPF Retirement Account (RA) or Special Account (SA)

You can give your parents and spouse a mini CPF monetary gift by topping up their CPF account. If your parents are over 55 years old, and their CPF RA hasn't exceeded the current Full Retirement Sum (FRS), you will be able to top up their account and enjoy tax savings.

If they are younger than 55 years old, their CPF SA must be at the current FRS subtracting the sum of SA savings and net SA savings withdrawn for investments for you to get tax relief benefits.

The maximum tax relief is capped at $7,000.

Instead of giving them cash, topping up their CPF SA/RA is a more thoughtful gesture, because not only will they get to enjoy a higher interest rate compared to a savings account, but it'll also help to increase their lifelong monthly payout through CPF Life. You can even borrow money from them and return it to them by topping up their SA/RA. Talk about maximising tax relief with no trade-offs!

Read more: 4 things to know for you to better help your parents manage their CPF (Endowus Insights)

2. Topping up your own CPF MediSave Account (CPF MA) or CPF SA

We recommend that you prioritise topping up your CPF MA over your CPF SA since you can use your CPF MA for various medical purposes and to pay the premiums of your hospitalisation policies, including MediShield Life/Integrated Shield Plans. You can also use it to pay for approved day surgeries such as wisdom tooth extractions, or approved chronic conditions such as asthma and psoriasis.

The maximum tax relief that you can enjoy is the lowest of:

  1. Voluntary cash contribution directed specifically to Medisave Account or
  2. The CPF contribution cap for the year ($37,740), less contribution from employment
  3. Existing Basic Healthcare Sum less Medisave Account Balance

In contrast the maximum tax relief you can get from topping up your own and your family's SA/RA is $14,000 in total, with a maximum of $7,000 for topping up your own SA/RA and another $7,000 for topping up you and your loved ones' account.

SRS top-up method that gives you income tax relief:

Topping up your Supplementary Retirement Scheme (SRS) account to lower taxable income

If you have been investing consistently and are comfortable with the volatility of the stock market, we strongly recommend topping up your SRS account as well. You can also take greater risk with investing through SRS. Additionally, in the scenario where you really need the cash from SRS, you also have the option to withdraw it with a 5% penalty, and the amount withdrawn will be taxable.

Which account to prioritise? A returns and flexibility perspective.

Which account to top up is highly subjective and is ultimately a very personal decision. Your age also affects the decision as well -- if you are older, topping up SRS or even your CPF SA makes more sense because you have a shorter lock-in period.

For those who are younger, we may prefer to top up the SRS account first because of the potential higher returns from SRS. A consistent, dollar cost average (DCA) approach for SRS investment (at no additional transactional cost through Endowus) will give you a better chance of hitting a 6% to 7% returns from investing in a 100% equity portfolio, so go ahead, check out the historical returns of the funds that we carry, and try playing around with the portfolio allocation.

However, be aware that there is value to having cash on hand versus having it locked up in CPF or SRS. As a rule of thumb, we would not recommend you to try to save on taxes if your obligations are below the 7% tax bracket, but again, if you are older, this consideration may change because the lock up period is shorter. Do note that since SRS is a tax deferral account, the more money you have in it, the more you may have to pay in taxes when you withdraw.


This article is for information purposes only and should not be considered as an offer, solicitation or advice for the purchase or sale of any investment products. It is recommended that you seek financial advice as to the suitability of any investment. Whilst Endow.us Pte. Ltd. (“Endowus”) has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies or typographical errors.

Any opinion or estimate above is made on a general basis and none of Endowus, nor any of its affiliates, representatives or agents have given any consideration to nor have made any investigation of the objective, financial situation or particular need of any user, reader, any specific person or group of persons. Opinions expressed herein are subject to change without notice.  

Investment involves risk. The value of investments and the income from them can go down as well as up, and you may not get the full amount you invested. Past performance is not an indicator nor a guarantee of future performance.

Please note that the above information does not purport to be all-inclusive or to contain all the information that you may need in order to make an informed decision. The information contained herein is not intended, and should not be construed, as legal, tax, regulatory, accounting or financial advice.

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