(Edited on 3rd September 2013: Changed a typo, it should be “Taxable income and not Tax Payable”.)
I was having lunch yesterday with an ex-classmate of mine and we were on the subject of tax-deductible charitable donations. I was actually surprise to hear that he was not aware of such tax deductions accorded for donations to charity!
So what are “Tax-Deductible Charitable Donations” and how can it benefit you?
Tax-Deductible charitable donations are donations that you make either in cash or shares donations for example, to approved charities or as defined by the Government, “Institutions of Public Character (IPC)”. An example of such IPCs are the Singapore Heart Foundation and Action for AIDS (Singapore).
It benefits you as a citizen especially when you are paying Income Tax because, the Government will accord you 2.5 times the deduction on the amount of your donation off your tax payable. What this means is that for every dollar that you donate to charities, the government will deduct $2.50 off your taxable income. If you have been paying Income Tax, you will know that this is something extremely beneficial.
Based on the Singapore Budget 2010, the government increased the tax deduction rate from 2 times to 2.5 times the amount for donations made from 1 January 2011 to 31 December 2015. The rate thereafter is pending future budget announcements and subject to revision.
So how do you go about donating and getting your tax-deductions?
First, please note that deductions are only applicable to approved IPCs and Charities. To find out if the IPCs you are donating to are approved by the Government, please do a search on the entity name here.
When you do a donation (and I’m not referring to the kind where you put pennies into the tin box on the streets), you will be required to provide your NRIC No. (or if you prefer to remain anonymous and not claim any tax deductions, just leave your NRIC out). The IPCs that you are donating to will then update your NRIC in their database which can then be extracted directly by IRAS. Thus when you file your income tax, IRAS will automatically generate the tax-deduction amount that you will get.
If you do not file your income tax individually because your employer is already doing so for you as they are in the auto-inclusion scheme with IRAS, the tax-deductions will also be reflected automatically.
So the next time when some office-clad person comes up to you with a clipboard asking you if you would like be part of the monthly donation scheme to a charity (Eg. Singapore Heart Foundation), sign up for it.
View the IRAS page here for the types of donations allowed and their descriptions.
On another note that I would like to add, is that donation should not be a subject of quantification of the kind of incentives that you can get. It’s more of the qualitative aspect of it, that feel-good moment when you know that you are donating for a good cause. If we keep on expecting to receive more, more than what we want to give, then that itself would bastardized the spirit of donation in the first place.