Calculate BSD by applying each rate to its own slice of the price.
Before you work out any stamp duty figure, open the IRAS website and find the current Buyer's Stamp Duty table and the stamp duty calculator. Keep both open. You'll do the sum by hand first and then check it against the calculator. Take your rates from that table and nowhere else.
Stamp duty is the tax you pay to IRAS when you buy property. There are three kinds, and this module covers them one at a time, starting with the one every buyer pays. Buyer's Stamp Duty (BSD) is paid by the buyer on every purchase of property in Singapore. That applies to HDB and private property, and to your first home or your tenth.
BSD is charged on the purchase price or the market value of the property, whichever is higher. For most buyers paying a market price, the purchase price is the figure that counts. The rule matters for resale flats and for purchases between family members. If you agree a price below market value, for example when buying from a relative, IRAS charges duty on the market value instead. So the first step in any calculation is to take the higher of the two figures.
BSD is tiered. The price is cut into slices, and higher slices carry higher rates. Each rate applies only to the part of the price that falls inside its slice. It works like income tax bands: if a pay rise takes you into a higher band, only the extra income is taxed at the higher rate.
Hakim and Farah are buying a flat in Bedok for S$620,000 (an example figure). Over lunch, Hakim tried to estimate the stamp duty. He remembered that the top rate for a flat at that price was "a few percent", so he took 3% and multiplied it by S$620,000. He told Farah the duty would be S$18,600, and she was so startled that she put down her fork.
His number was wrong, and too high, because he applied the top rate to the whole price. To see the correct method, use these tiers: 1% on the first S$200,000, 2% on the next S$300,000 up to S$500,000, and 3% on everything above S$500,000. Cut the Bedok price along those boundaries, multiply each slice by its own rate, and add the results:
First slice: 1% x S$200,000 = S$2,000 Second slice: 2% x S$300,000 = S$6,000 Third slice: the amount above S$500,000 is S$120,000, and 3% x S$120,000 = S$3,600 Total: S$2,000 + S$6,000 + S$3,600 = S$11,600
Hakim's method, 3% x S$620,000 = S$18,600, overstated the duty by S$18,600 - S$11,600 = S$7,000. Applying the top rate to the whole price is the common mistake, and people make it for the same reason they overestimate their income tax. The reverse mistake is applying the lowest rate to the whole price. That understates BSD and leaves you budgeting far too little.
Because of the slices, BSD as a share of the price grows as the price rises. Take the S$450,000 BTO price from lesson 1.5, "Compare two homes over ten years". Under the same invented tiers, its BSD is S$7,000, about 1.6% of the price. At S$620,000 the duty is about 1.9% of the price. A S$1.2 million condo comes to S$29,000, about 2.4%.
The real IRAS table has more tiers than the example above, and it changes from time to time. BSD rates have been revised several times over the years, and the top tiers in particular change with housing policy. A figure from a friend's purchase, or from an article a few years old, may be out of date.
Get the current tiers from the IRAS website and do the sum yourself, slice by slice. Then run the same price through the IRAS stamp duty calculator. If the two match, you understand how the duty works and you have a figure you can trust. If they don't match, you've most likely typed a slice boundary wrongly or put a rate in the wrong row. If you find that error now, you won't repeat it when you build your own calculator in lesson 3.4, "Build a stamp duty calculator".
BSD is due within a short period after you sign the contract. For a resale purchase, that is usually when you exercise the option to purchase. IRAS sets the deadline, and late payment brings penalties. Your lawyer normally handles paying it with you on time, so ask them how payment will work for your purchase.
You can use your CPF Ordinary Account for BSD, but the timing catches people out. The duty is often due before CPF has approved its use for the purchase. Many buyers pay in cash first and are reimbursed from CPF once the purchase is approved and completes. Keep enough cash to cover the duty for those weeks before the reimbursement arrives. The rest of the upfront home-buying bill is sorted into cash and CPF in "Big goals: wedding, home, car and kids", lesson 4.2, "Which parts must be cash and which CPF can pay".
Hakim and Farah worked out the real BSD for the Bedok flat and checked it against the calculator. Then they put that figure into the stamp duty row of their comparison sheet, replacing the example placeholder. Do the same for the home you are considering, in the activity below.
Pick one home you are considering. Work out its BSD with the current IRAS table, then with the IRAS calculator, and check that the two figures match.
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