What is the EIS 400% tax deduction for AI in Singapore?

The Enterprise Innovation Scheme (EIS) allows Singapore businesses to claim a 400% tax deduction on up to S$50,000 of qualifying AI expenditure per Year of Assessment (YA 2025-2028). This means for every S$1 spent on qualifying AI tools, you can deduct S$4 from your taxable income, resulting in significant tax savings.

What is the Productivity Solutions Grant (PSG) for AI tools?

The PSG is a Singapore government grant that provides up to 50% funding support for SMEs adopting pre-approved IT solutions, including AI tools for HR, accounting, and customer support. Eligible businesses must be registered in Singapore with at least 30% local shareholding.

Can I claim both PSG and EIS for the same AI tool?

Yes, you can stack both grants. Use the PSG to get 50% funding for a pre-approved AI solution, then claim the EIS 400% tax deduction on your remaining out-of-pocket expense. This combination can reduce the effective cost of AI adoption by up to 80%.

Which AI tools are PSG-approved in Singapore for 2026?

PSG-approved AI tools include solutions for HR/Payroll (QuickHR, JustLogin, Talenox), Accounting (Xero, AutoCount, Volopay), and Customer Support (Zendesk, Freshdesk, Tidio). The full list is available on the GoBusiness Gov Assist portal and SGAI Finder directory.

How do I apply for the PSG grant for AI tools in Singapore?

To apply for PSG: 1) Select a pre-approved AI solution from GoBusiness. 2) Get a quotation from the vendor. 3) Submit your application via the Business Grants Portal (BGP) using Corppass before making any payment. 4) Await the Letter of Offer. 5) Implement the solution and submit your claim.

What are the best AI solutions for businesses in Jurong East Singapore?

Businesses in Jurong East and across Singapore can access PSG-approved AI solutions for accounting (Xero, Volopay), HR (QuickHR, JustLogin), and customer support (Zendesk, Freshdesk). These tools qualify for up to 50% PSG funding and 400% EIS tax deductions.

How much can my Singapore SME save with AI grants in 2026?

A typical Singapore SME spending S$20,000 on AI tools can save up to S$10,000 via PSG (50% funding) plus S$6,800 in EIS tax savings (400% deduction on remaining S$10,000 at 17% tax rate), for a total savings of S$16,800 — reducing the effective cost to just S$3,200.

AI for SMEs: Everything You Need to Know About Singapore Budget 2026

Singapore's commitment to a digital-first economy has taken a significant leap forward with the announcement of the Singapore Budget 2026. For Small and Medium-sized Enterprises (SMEs), the message is clear: the future is powered by Artificial Intelligence (AI), and the government is providing substantial support to ensure no business is left behind. This article breaks down the key announcements from the AI SMEs Singapore Budget 2026, providing a comprehensive guide for business owners looking to harness the power of AI.

The Future is Artificial: Singapore's Big Bet on AI

The Singapore government has long championed technological adoption, and the latest budget solidifies its focus on AI as a strategic national priority. The goal is to move beyond isolated experiments and drive end-to-end transformation across industries. For SMEs, this presents a golden opportunity to enhance productivity, unlock new capabilities, and gain a competitive edge in the global market.

What the AI SMEs Singapore Budget 2026 Means for Your Business

The budget introduces a suite of measures designed to accelerate AI adoption. These initiatives aim to de-risk the investment for SMEs and provide a clear pathway for implementation. From generous tax deductions to co-funding for pre-approved solutions, the government is creating a fertile ground for innovation. This is particularly relevant for businesses in areas like SME digitalization in Tampines, where local enterprises can leverage these programmes to optimise their operations and better serve the community.

Unpacking the Grants: Your Guide to AI Funding

Two key grants stand out in the AI SMEs Singapore Budget 2026: the Enterprise Innovation Scheme (EIS) and the Productivity Solutions Grant (PSG). Understanding the nuances of each is crucial for maximising the support available.

The Enterprise Innovation Scheme (EIS): 400% Tax Deduction for AI

The EIS has been enhanced to specifically include AI-related expenditures. This is a game-changer for SMEs investing in their technological capabilities. Under the scheme, businesses can claim a 400% tax deduction on up to S$50,000 of qualifying AI expenditure per Year of Assessment (YA 2027-2028). This translates to a potential tax saving of S$34,000 (at a 17% corporate tax rate), effectively making the government a co-investor in your AI journey.

> Qualifying Activities: The scope of qualifying activities is broad, covering R&D, registration of intellectual property, acquisition and licensing of intellectual property rights, and specialised training. More details on AI-specific qualifying expenditures will be released by IRAS by mid-2026. [1]

The Productivity Solutions Grant (PSG): Up to 50% Support for AI Solutions

The PSG is designed for SMEs looking to adopt pre-approved, off-the-shelf IT solutions and equipment. The grant provides up to 50% funding support for these solutions, making it an accessible entry point for businesses new to AI. The range of supported solutions is expanding to include more AI-enabled tools, covering areas from customer management to data analytics.

EIS vs. PSG: Which Grant is Right for You?

Feature	Enterprise Innovation Scheme (EIS)	Productivity Solutions Grant (PSG)
Support Type	Tax Deduction (400%)	Grant (Up to 50% of cost)
Expenditure Cap	S$50,000 per YA for AI	Varies by solution
Best For	Deeper, more customised AI projects, R&D	Adoption of pre-approved, market-proven solutions
Cash Flow Impact	Reduces tax liability at year-end	Reduces up-front cost of solution
Application	Claimed during annual tax filing	Applied for before purchasing solution

CASE STUDY: How a Tampines Logistics Company Saved S$29,000 and Cut Fuel Costs by 30%

To illustrate the real-world impact of these grants, let's consider a hypothetical logistics company, "Tampines Express," with a fleet of 25 vehicles.

The Challenge: Inefficient Routes and Rising Fuel Costs

Tampines Express was facing significant challenges with rising fuel prices and inefficient delivery routes. Drivers were often stuck in traffic, leading to delays and increased operational costs. The company needed a solution to optimise its logistics and improve its bottom line.

The Solution: AI-Powered Route Optimisation

After exploring their options, Tampines Express decided to invest in an AI-powered route optimisation software. The software, a pre-approved solution under the PSG, analyses real-time traffic data, vehicle capacity, and delivery windows to generate the most efficient routes for their drivers. The total cost of the software was S$24,000.

The Results: Tangible Savings and a Competitive Edge

By leveraging the PSG, Tampines Express received S$12,000 in funding, cutting their initial investment in half. Furthermore, they invested an additional S$25,000 in training and customisation, which qualified for the EIS. This resulted in a tax deduction of S$100,000 (400% of S$25,000), leading to a tax saving of S$17,000. The combined savings from both grants amounted to S$29,000.

More importantly, the AI solution delivered significant operational improvements:

30% reduction in fuel costs due to optimised routes.

15% increase in on-time deliveries, improving customer satisfaction.

Enhanced driver productivity, allowing them to complete more deliveries per day.

This case study demonstrates the powerful combination of government support and strategic AI adoption. It’s a clear example of how AI adoption for businesses in Woodlands and other commercial hubs can drive substantial growth.

Practical Steps to AI Adoption for Your SME

Embarking on your AI journey can seem daunting, but a structured approach can simplify the process.

Step 1: Identify Your Business Pains

Start by identifying the most significant challenges in your business. Are you struggling with inefficient processes, high operational costs, or poor customer engagement? Pinpointing these pain points will help you identify the right AI solution.

Step 2: Explore Pre-Approved Solutions

Visit the GoBusiness Gov Assist portal to explore the list of pre-approved solutions under the PSG. This is an excellent starting point for finding market-proven tools that can address your specific needs.

Step 3: Tap on Expert Consultation

Don't hesitate to seek advice from technology consultants or attend workshops organised by agencies like Enterprise Singapore and IMDA. They can provide valuable insights and guide you through the selection and implementation process.

Beyond the Grants: Building a Future-Ready Business in Woodlands and Beyond

The AI SMEs Singapore Budget 2026 is more than just a series of grants; it's a call to action for businesses to embrace the future. By strategically adopting AI, SMEs can not only improve their efficiency but also unlock new revenue streams and business models. The focus on AI adoption for businesses in Woodlands and other key commercial centres underscores the government's commitment to ensuring that all enterprises, regardless of location, can participate in this technological revolution.

Your Next Step: Find the Right AI Solution with SGAI Finder

Ready to take the next step? Visit SGAI Finder, Singapore's leading directory of AI solutions for SMEs. Discover a curated list of tools and vendors that can help you transform your business.

Frequently Asked Questions (FAQ)

1. What is the main goal of the AI incentives in the Singapore Budget 2026?

The primary goal is to accelerate the adoption of AI among SMEs to enhance productivity, foster innovation, and maintain Singapore's competitive edge in the global economy.

2. Can I claim both the PSG and EIS for the same project?

Yes, you can. The PSG reduces the initial cost of a pre-approved solution, while the EIS provides a tax deduction on other qualifying expenditures related to the project, such as training and customisation.

3. Are the grants only for tech companies?

No, the grants are available to SMEs across all industries. The focus is on the application of AI to improve business processes, regardless of the sector.

4. How do I know if an AI solution is right for my business?

Start by identifying your business needs and challenges. Then, research pre-approved solutions and consult with technology experts to find a tool that aligns with your goals and budget.

5. Where can I find more information about the grants?

Official sources like the websites of IRAS, Enterprise Singapore, and the Singapore Budget are the best places for detailed and up-to-date information.

References

[1] Inland Revenue Authority of Singapore. (2026). Enterprise Innovation Scheme (EIS). Retrieved from https://www.iras.gov.sg/schemes/disbursement-schemes/enterprise-innovation-scheme-(eis) [2] Singapore Budget. (2026). C. Harness AI As A Strategic Advantage. Retrieved from https://www.singaporebudget.gov.sg/budget-speech/budget-statement/c-harness-ai-as-a-strategic-advantage