Passive income
Learn what passive income is, how to earn it in Singapore and how IRAS taxes each type.
December 2023 | Published by Xero
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- Passive income is money you earn with little day-to-day effort, though it usually takes upfront time or money to set up
- Small business owners can build passive income by selling digital products, creating content, renting out spare assets and offering subscriptions
- In Singapore, one-tier dividends and most capital gains aren’t taxed for individuals, but rental and side-business income are taxable at resident rates
- Tracking each passive income stream alongside your business finances keeps you ready for tax season and shows which streams deserve more of your time
What is passive income?
Passive income is money you earn from assets, investments or systems you’ve already set up, with little day-to-day work from you. It keeps coming in after the setup is done.
Most streams need real effort upfront, like writing an ebook or saving enough to invest. The ‘passive’ part describes how the money flows once that work is finished, and meaningful returns usually take months to build.
Picture a florist who writes a wedding-flower planning guide and sells it online. She writes it once, and each sale lands in her account while she’s busy with walk-in customers. For you, that kind of extra income can smooth cash flow in quieter months and ease your reliance on trading hours for money.
Passive income vs active income
Active income needs your time to earn it, while passive income keeps arriving when you step away. Knowing the difference helps you plan your finances and report your income correctly.
Active income stops when you stop working. Salaries, freelance fees, consulting charges and client project revenue all count as active income.
Passive income comes from work or money you’ve put in upfront. Rental income and book royalties are two common examples.
Some people also talk about a third category, portfolio income, which covers investment earnings such as dividends and interest. The Inland Revenue Authority of Singapore (IRAS) treats these income types differently for tax purposes. If you run a side business, sorting income into these groups makes filing on myTax Portal simpler.
Types of passive income
Passive income generally falls into three broad types: business-based, investment-based and digital. Knowing which suits your situation helps you pick a starting point.
Business-based passive income
Business-based passive income comes from commercial systems that run without your constant involvement. Examples include rental properties, vending machines, laundromats or a business you own but don’t manage day to day.
It can also mean productising your expertise. If you deliver a service in person, you could package that knowledge into a template pack or a licensing deal. Customers then buy it without you in the room.
Investment-based passive income
Investment-based passive income comes from putting your money to work. Dividends from shares and distributions from real estate investment trusts (REITs) fall into this group. So does interest from savings accounts and bonds.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.
What you earn depends on how much you invest and the rate of return. For example, a S$10,000 investment with a 4% annual yield would produce roughly S$400 a year. Building meaningful investment income usually takes time and regular contributions.
Digital and online passive income
Digital passive income comes from online products and platforms. Ebooks, online courses, stock photography and affiliate websites are common examples.
Digital products are often cheaper to create than physical goods, and they scale without much extra cost. Once your course is live on a platform, it can sell to hundreds of customers while you focus on other work. For more inspiration, browse these online business ideas.
Passive income ideas for small businesses
Your existing skills and resources give you a head start on passive income. Whether you’re weighing up home business ideas or adding income to an established company, these four ideas are practical places to begin.
Sell your expertise as digital products
You know your industry better than most, and that know-how has value beyond the services you offer. Packaging it into digital products lets you sell it again and again without adding hours.
Consider creating:
- ebooks or guides that solve a specific problem for your customers
- templates or spreadsheets that save your audience time
- online courses that teach a skill you’re known for
- downloadable checklists or planners
Ecommerce and course-hosting platforms make listing and selling digital products straightforward. The products that sell best solve a real problem people will pay to fix.
Create content
Content can earn advertising revenue and affiliate commissions long after you publish it. A YouTube channel, podcast, blog or newsletter needs an audience first, and then older pieces keep earning.
A well-optimised blog article can attract search traffic for months or years. The upfront time is real, but ongoing upkeep is fairly light.
Capitalise on your resources
Many small businesses have physical assets that sit idle for part of the week. If you’ve got spare office space or specialist equipment, renting it out can bring in steady income for little effort.
Options to consider include:
- renting out spare desks through flexible workspace platforms
- listing equipment for hire when you’re not using it
- joining affiliate programmes for products you already use and recommend
- renting out parking or storage space you don’t need full time
Affiliate marketing suits you best if you already have a website or newsletter audience. You earn a commission each time someone buys a product you recommend. It also pairs well with freelance work, since your clients already trust your advice.
Offer subscription services
Subscriptions turn one-off purchases into recurring revenue. If you can bundle your expertise or products into a monthly offer, you’ll create a more predictable income stream.
Examples include membership sites with exclusive content and ongoing access to a library of templates. Recurring billing builds customer loyalty and gives you income you can plan around each month.
Investment options for passive income in Singapore
If you’ve got savings beyond what your business needs, Singapore gives you several low-effort ways to earn passive income from them. Each option below suits a different level of risk and access to your cash.
Dividend shares and S-REITs on SGX
Dividend-paying companies listed on the Singapore Exchange (SGX) share part of their profits with you at regular intervals. You can buy individual shares or dividend-focused funds through a brokerage account.
Singapore real estate investment trusts (S-REITs) let you invest in property without buying a building. Under IRAS rules for REITs, they must distribute at least 90% of their taxable income to get tax transparency treatment, which is why many investors use them for regular payouts.
Singapore Savings Bonds
Singapore Savings Bonds (SSBs) are fully backed by the Singapore Government and pay interest that steps up the longer you hold them. According to the Monetary Authority of Singapore (MAS), you can invest for up to 10 years and exit in any month with no penalty. Rates change with each monthly issue, so check the current one before you apply.
Savings accounts with approved banks
A savings account or fixed deposit with a bank in Singapore is the simplest option. You deposit cash and earn interest with no specialist knowledge.
Returns are modest, so a savings account works best as a starting point or an emergency buffer alongside other streams.
CPF interest
Your Central Provident Fund (CPF) savings earn interest at rates reviewed every quarter. From 1 October to 31 December 2026, the CPF Board pays 2.5% a year on Ordinary Account savings. Special, MediSave and Retirement Account savings earn 4% a year.
That makes CPF a low-risk foundation that grows without any effort from you. Check the latest rates each quarter before you plan around them.
Supplementary Retirement Scheme
The Supplementary Retirement Scheme (SRS) is a voluntary scheme that lets you save for retirement with tax benefits. You can contribute up to S$15,300 a year as a citizen or permanent resident, or S$35,700 as a foreigner.
According to IRAS guidance on SRS, contributions qualify for tax relief and returns grow tax-free before withdrawal. Only 50% of withdrawals are taxable at retirement. SRS relief counts towards the S$80,000 overall cap on personal income tax reliefs.
How much capital you need for S$1,000 a month
To estimate your target, divide the yearly income you want by the yield you expect. S$1,000 a month is S$12,000 a year.
Using a hypothetical 4% yield, you’d need about S$300,000 invested, because S$12,000 divided by 4% is S$300,000. Treat this as an illustration only: real yields change over time, and a lower yield raises the capital you need.
How passive income is taxed in Singapore
Most investment returns are tax-free for individuals in Singapore, but rental income and side-business income are taxable. Each exemption has limits, so it helps to know where they sit.
According to IRAS, these types of passive income are generally tax-free for individuals:
- gains from selling shares or property, unless IRAS treats you as trading based on factors like how often you buy and sell
- one-tier dividends from Singapore-resident companies, except dividends from co-operatives
- S-REIT distributions, unless you receive them through a partnership or a trade in REITs
- interest on deposits with approved banks and licensed finance companies in Singapore
Rental income is taxable at your personal income tax rates. For residential property, you can deduct deemed rental expenses of 15% of the gross rent, plus mortgage interest on the loan for that property.
Income from a side business, such as digital product sales or subscriptions, counts as trade income and is taxable too. Resident income tax rates are progressive, ranging 0%–24% from Year of Assessment 2024. The top rate applies only above S$1 million of chargeable income.
You declare this income when you e-file your tax return on myTax Portal by 18 April each year. If your side business grows and its taxable turnover goes above S$1 million, you’ll need to register for goods and services tax (GST).
Your circumstances shape what you owe, so talk to an accountant or tax adviser before you file. They can confirm how each stream is treated alongside your business income.
How to start earning passive income
Start by building on what you already have, then grow at a pace that suits your cash flow. These five steps help you pick an approach and build momentum.
1. Assess your skills and resources
Look at what you already have before you spend anything. Which expertise could you package into a product, and do you have spare space or savings to put to work?
The strongest streams build on strengths you’ve already developed. Browsing small business ideas can help you narrow your focus.
2. Start small and test
You can begin with a modest amount of money or time. Create one digital product, or put a small sum into Singapore Savings Bonds or your SRS account.
Starting small shows you what works before you commit more.
3. Set realistic expectations
Most passive income streams take months to produce meaningful returns. An online course might take weeks to create and months to gain traction, and investment returns compound over years.
Steady, consistent effort pays off more than hunting for the perfect idea.
4. Diversify your streams
Spreading your income across more than one source gives you more stability. If you pair a digital product with investment income, one stream can cushion the dip when the other slows.
5. Track your finances from the start
Keep separate, up-to-date records for each stream from the first day. Clear records make filing your tax return simpler and show which streams are worth growing.
Manage your passive income with Xero
Passive income works best when you can see what each stream earns and costs. As your streams grow, tracking income and expenses across them takes more effort.
Xero brings all your finances into one place, so you can see how each stream performs next to your main business revenue. Automatic bank feeds pull in transactions as they arrive, ready for you to categorise by source.
Customisable financial reports break down earnings by stream, so you can spot your most profitable ones and prepare for tax time. To see how it works with your own numbers, get one month free with Xero.
FAQs on passive income
Here are quick answers to common questions about passive income in Singapore.
How much money can you make from passive income?
Your earnings depend on the capital or time you put in and the demand for what you offer, so amounts vary widely. Treat early income as a top-up to your business revenue, and scale up once a stream shows steady results over several months.
Is passive income really passive?
Mostly, once it’s set up, though almost every stream needs some upkeep, like updating a course or reviewing your investments. Count that upkeep as part of the cost when you decide whether a stream is worth keeping.
Do you pay tax on passive income in Singapore?
Yes, on rental and side-business income, while one-tier dividends and approved-bank interest generally stay tax-free. According to IRAS, choosing actual rental expenses over the 15% deemed amount applies to all your tenanted residential properties that year.
How much do you need to invest to earn S$1,000 a month?
Divide S$12,000 by the yield you expect: at a hypothetical 3% yield you’d need S$400,000, and at a hypothetical 5% you’d need S$240,000. Adding business-based income, like a digital product, reduces how much capital your investments alone must supply.
What is the easiest passive income to start?
Choose based on what you have more of. Spare cash suits a bank deposit or Singapore Savings Bonds, while spare hours suit a simple template or checklist you already use with clients.