Statute Details
- Title: Income Tax (Relief and Deduction under Section 39) Rules 2021
- Act Code: ITA1947-S1028-2021
- Type: Subsidiary legislation (SL)
- Authorising Act: Income Tax Act (Cap. 134), section 7(1)
- Commencement: 1 January 2022
- Current status (version): Current version as at 27 March 2026
- Key amendments noted in extract: Amended by S 280/2025 (effective 25/04/2025)
- Key provisions (from extract):
- Rule 1: Citation and commencement
- Rule 2: Definitions
- Rule 2A: Prescribed transitional amount (for YA 2026–2029)
- Rules 3–8: Maximum relief amounts and deduction limits for section 39(3) and 39(3A) (including specified amounts for payments to retirement and special accounts)
What Is This Legislation About?
The Income Tax (Relief and Deduction under Section 39) Rules 2021 (“Section 39 Relief Rules”) are subsidiary rules made under the Income Tax Act to operationalise tax relief and deductions connected to Central Provident Fund (CPF) arrangements. In practical terms, the Rules translate the broad relief framework in section 39 of the Income Tax Act into concrete computational rules—especially where relief depends on payments made by one person to another person’s CPF accounts (for example, where a claimant makes payments to a related member’s retirement account and/or special account).
Section 39 of the Income Tax Act provides for deductions (and certain relief mechanisms) linked to CPF contributions and topping-up arrangements. The Section 39 Relief Rules focus on the “relief and deduction” side: they define key terms, prescribe transitional amounts for specific years, and set out how to calculate the “applicable maximum relief amount” and “specified amounts” that cap the deduction a claimant may claim.
Because CPF rules are highly technical and depend on account types (retirement account vs special account) and on prevailing CPF sums, the Section 39 Relief Rules are designed to ensure that tax deductions align with CPF mechanics. For practitioners, the Rules are therefore less about policy and more about precision: they determine what portion of a payment can be recognised for tax deduction purposes, and how those portions are aggregated across multiple payments and multiple related members.
What Are the Key Provisions?
Rule 1 (Citation and commencement) confirms that the Rules are the “Income Tax (Relief and Deduction under Section 39) Rules 2021” and that they come into operation on 1 January 2022. It also notes an amendment history in the extract (S 280/2025 effective 25/04/2025), which is relevant for determining which computational rules apply for later years of assessment.
Rule 2 (Definitions) is foundational. It defines terms that recur throughout the computational provisions, including:
- “claimant”: an individual who claims a deduction under section 39(3) or (3A) of the Income Tax Act for a year of assessment;
- “member”: an individual to whose credit amounts stand in CPF, or for whom CPF accounts are maintained;
- “related member”: a member related to the claimant in one of the ways specified in section 39(3) of the Act;
- “retirement account”, “retirement sum” and “special account”: meanings drawn from the Central Provident Fund Act 1953;
- “basic healthcare sum”: the amount directed under section 13(6) of the CPF Act;
- “prevailing retirement sum”: meaning under the CPF (Retirement Sum Topping-Up Scheme) Regulations;
- “preceding year”: the year preceding the year of assessment for which the deduction is claimed.
Rule 2(2) further clarifies that the “retirement sum that has been set aside by a member at any time” is determined in accordance with the CPF (Retirement Sum Topping-Up Scheme) Regulations. This matters because the tax deduction caps in later rules depend on comparisons between the prevailing retirement sum and the retirement sum already set aside.
Rule 2A (Prescribed transitional amount) introduces a transitional computational mechanism for years of assessment 2026, 2027, 2028 and 2029 in respect of section 39(2)(hb) of the Act. The Rule prescribes a formula: (A – B) × C, where:
- A is a percentage of APE (aggregate platform earnings) that would apply in computing December 2029 contributions for a Group A worker, subject to assumptions about APE exceeding $750 and the worker’s age being treated as the individual’s age for the relevant comparison;
- B is a percentage of APE that would apply in computing December of the year immediately preceding the year of assessment, again with assumptions about APE exceeding $750 and the worker being treated as born on the same day as the individual;
- C is the total of the individual’s APE as a Group A worker for each calendar month in the year immediately preceding that year of assessment.
Rule 2A(2) clarifies that “APE for a month” refers to the Group A worker’s aggregate platform earnings within the meaning of the Fourth Schedule to the CPF Act. For practitioners, this transitional rule is a reminder that the Section 39 Relief Rules are not limited to traditional CPF topping-up scenarios; they also accommodate newer CPF contribution frameworks involving platform workers.
Rules 3–5 (Maximum relief amounts and specified amounts for retirement and special accounts) are the core of the deduction computation. Rule 3 sets the “applicable maximum relief amount” for section 39(3)(c)(i) and (3A)(c)(i) by combining two components (for example, A + B or C + D) depending on whether the claimant made one payment or multiple payments in the preceding year, and depending on whether the payments were to the retirement account or the special account of a related member.
Rule 3(1) addresses section 39(3)(c)(i) and provides that the applicable maximum relief amount is calculated using A + B, where:
- A is the specified amount under Rule 4 (retirement account) depending on whether there was one payment or multiple payments;
- B is the specified amount under Rule 5 (special account) depending on whether there was one payment or multiple payments.
Rule 3(2) similarly addresses section 39(3A)(c)(i) using C + D, with C determined under Rule 4 for retirement account payments and D determined under Rule 5 for special account payments, again distinguishing between one payment and multiple payments.
Rule 4 (Specified amount for payment to retirement account) determines what portion of a payment counts for the retirement account component. For each payment, the specified amount is the lower of:
- the amount of the payment; and
- the amount by which the prevailing retirement sum at the time of payment exceeds the retirement sum already set aside immediately before that payment.
Where there are multiple payments, Rule 4(2) requires summing the specified amounts for each payment (each again being the lower of the payment amount and the “gap” between prevailing retirement sum and the retirement sum already set aside).
Rule 5 (Specified amount for payment to special account) performs a parallel function for the special account component. For each payment, the specified amount is the lower of:
- the amount of the payment; and
- the maximum amount prescribed in regulation 7(1) of the CPF (Topping-Up of Special Account) Regulations (Rg 37), as that maximum applies to the member immediately before the payment.
Again, if there are multiple payments, the specified amount is the sum of the per-payment specified amounts.
Rules 6–8 (Deduction limits and other maximum relief amounts) extend the computational framework to other limbs of section 39(3) and 39(3A), including deduction limits for section 39(3)(d) and (3A)(d). The extract shows the heading and commencement of Rule 6, but not the full text. Practitioners should treat Rules 6–8 as essential for determining the final cap on deductions beyond the retirement/special account components—particularly where the Act imposes additional limits tied to the structure of the deduction (for example, limits that apply regardless of the size of the payment, or limits that depend on the claimant’s and related member’s circumstances).
How Is This Legislation Structured?
The Section 39 Relief Rules are structured as a short set of rules that “plug into” section 39 of the Income Tax Act. The structure is:
- Rule 1: citation and commencement;
- Rule 2: definitions used throughout the Rules;
- Rule 2A: a transitional amount formula for specified years of assessment (YA 2026–2029) under section 39(2)(hb);
- Rules 3–5: computation of applicable maximum relief amounts for certain limbs of section 39(3) and 39(3A), including specified amounts for payments to retirement and special accounts;
- Rules 6–8: additional maximum relief amounts and deduction limits for other limbs of section 39(3) and 39(3A).
In practice, a practitioner typically works from the claimant’s chosen deduction limb under section 39, then applies the corresponding rule(s) to compute the cap and the allowable deduction amount.
Who Does This Legislation Apply To?
The Rules apply to individual claimants who claim deductions under section 39(3) or section 39(3A) of the Income Tax Act for a year of assessment. The Rules also operate by reference to related members—CPF members who are related to the claimant in the manner specified in section 39(3) of the Act.
Because the Rules define “member” by reference to CPF accounts and define “retirement sum” and “special account” by reference to the CPF Act, the practical effect is that the claimant’s entitlement depends on the CPF status and account mechanics of the related member(s). Where the transitional rule in Rule 2A applies, the claimant’s situation may also involve platform worker contribution computations under the CPF framework for Group A workers.
Why Is This Legislation Important?
For tax practitioners, the Section 39 Relief Rules are important because they determine the ceiling and the recognised portion of qualifying payments. Even where a claimant makes a large payment to a related member’s CPF accounts, the Rules can restrict the deductible amount by comparing the payment against (i) the prevailing retirement sum gap (for retirement account payments) and (ii) the prescribed maximum topping-up limit for the special account.
These caps are not merely administrative. They affect the quantum of taxable income adjustments and can influence compliance outcomes, including whether a deduction is accepted in full, partially, or disallowed. The Rules also require careful record-keeping because the computation distinguishes between one payment and multiple payments in the preceding year, and because the “prevailing” amounts are determined at the time of each payment.
Finally, the existence of Rule 2A underscores that the relief framework evolves with CPF policy changes. Practitioners advising on deductions for years of assessment 2026–2029 must consider transitional formulas that incorporate platform earnings (APE) and specific assumptions about contribution percentages and age/APE thresholds.
Related Legislation
- Income Tax Act (Cap. 134) — section 39 (relief and deduction) and section 7(1) (power to make rules)
- Central Provident Fund Act 1953 — definitions and CPF account concepts; also referenced for “basic healthcare sum” and platform worker contribution structures
- Central Provident Fund (Retirement Sum Topping-Up Scheme) Regulations — definition of “prevailing retirement sum”
- Central Provident Fund (Topping-Up of Special Account) Regulations (Rg 37) — regulation 7(1) (maximum amount prescribed for special account topping-up)
Source Documents
This article provides an overview of the Income Tax (Relief and Deduction under Section 39) Rules 2021 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.