Budget 2026 adds AI as a new qualifying activity under EIS. Here’s exactly what changed and how it interacts with existing EIS benefits.
What Changed in EIS After Budget 2026?
| Before Budget 2026 | After Budget 2026 | Effective | |
|---|---|---|---|
| Qualifying activities | 4 categories (R&D, IP, Innovation, Training) | 5 categories (+AI Expenditures) | YA 2027 |
| AI expenditures | Not a separate category | 400% deduction on first S$50K/YA | YA 2027 – YA 2028 |
| AI cap | N/A | S$50,000 per YA (separate from R&D) | YA 2027 |
| R&D cap | S$400,000 per YA | S$400,000 per YA (unchanged) | — |
| Cash payout (AI) | N/A | Not available for AI activity | — |
| Cash payout (other EIS) | 20% on up to S$100K | 20% on up to S$100K (unchanged) | — |
How Much Can You Save? Worked Example
Scenario: Your company spends S$50,000 on qualifying AI tools and subscriptions in one year.
| Calculation | Amount | |
|---|---|---|
| AI expenditure | S$50,000 | |
| Enhanced deduction (400%) | S$50,000 × 4 | S$200,000 |
| Tax savings (at 17%) | S$200,000 × 17% | S$34,000 |
Result: S$34,000 in tax savings from S$50,000 of AI spending — a 68% effective return.
This is on top of any existing EIS claims for R&D, IP registration, innovation projects, or training. The S$50K AI cap is separate.
Combined EIS Example
| EIS Category | Qualifying Spend | Deduction (400%) | Tax Savings (17%) |
|---|---|---|---|
| R&D | S$400,000 | S$1,600,000 | S$272,000 |
| AI Expenditures | S$50,000 | S$200,000 | S$34,000 |
| Total | S$450,000 | S$1,800,000 | S$306,000 |
What Qualifies as AI Expenditure?
IRAS will release detailed guidelines for the new AI activity. Based on Budget 2026 Annex C-1, qualifying expenses are expected to include:
- AI software subscriptions and SaaS tools
- AI platform licensing fees
- Cloud computing costs for AI workloads
- AI training and fine-tuning costs
- AI-related consulting and implementation services
Important: The AI activity is a separate 5th category. It is not a sub-cap of the existing R&D category. You can claim both R&D (up to S$400K) and AI expenditures (up to S$50K) in the same YA.
What Does NOT Qualify
- General IT software not specifically AI-related
- Hardware purchases (unless directly tied to AI workloads)
- Expenses already claimed under another EIS category
- Activities outside the YA 2027–2028 window
How Does This Interact With Existing EIS?
The AI activity sits alongside — not within — existing EIS categories:
| EIS Category | Cap (per YA) | Cash Payout Option |
|---|---|---|
| 1. R&D | S$400,000 | Yes (20% on up to S$100K) |
| 2. IP Registration | S$400,000 | Yes |
| 3. Innovation Projects | S$400,000 | Yes |
| 4. Training | S$400,000 | Yes |
| 5. AI Expenditures (NEW) | S$50,000 | No |
Key rules:
- You cannot claim the same expense under two categories (e.g., AI R&D cannot be claimed under both R&D and AI)
- The AI cap (S$50K) is much lower than other categories (S$400K)
- No cash payout option for AI — must have taxable income to benefit
Why No Cash Payout?
Unlike other EIS categories, the AI activity does not offer a cash payout option. This means:
- Loss-making companies or startups without taxable income cannot convert AI expenses to cash
- You need sufficient taxable income to fully benefit from the 400% deduction
- For companies without taxable income, the existing R&D category with cash payout may be more useful
When Do IRAS Guidelines Come Out?
| Milestone | Expected Date |
|---|---|
| Budget 2026 announcement | 12 February 2026 |
| IRAS detailed guidelines | Mid-2026 (estimated) |
| AI activity takes effect | YA 2027 (expenses from 2026) |
| AI activity ends | YA 2028 (expenses from 2027) |
Note: Until IRAS publishes detailed guidelines, the exact scope of qualifying AI expenses may evolve. Keep records of all AI-related spending from 2026 onwards.
How to Claim on Your Tax Return
EIS AI deductions are self-assessed — you claim them when filing your annual corporate tax return. There is no separate application to IRAS or EnterpriseSG.
Filing process:
- Incur qualifying AI expenditure during the relevant financial year
- Prepare supporting documents: invoices, payment proofs, vendor contracts, description of AI tools/services used
- Calculate the enhanced deduction (400% of qualifying amount, up to S$50K cap)
- Report the deduction in your Form C-S or Form C under the EIS section
- Submit by the filing deadline: 30 November (paper) or 15 December (e-filing) of the Year of Assessment
Important notes:
- This is a tax deduction, not a cash grant — it reduces your taxable income
- No cash payout option is available for the AI activity (unlike R&D and other EIS categories)
- Keep all supporting documents for at least 5 years — IRAS may audit your claim
- You cannot claim the same expense under both EIS AI and another EIS category (e.g., R&D)
- You cannot double-dip: if an EnterpriseSG grant already covers the same cost, you cannot also claim EIS
Related filing guides:
- EIS Claim Checklist: Documents & Deadlines — full document list for all EIS categories
- IRAS Tax Incentives Directory — overview of all IRAS incentives
- CIT Rebate & Cash Grant YA 2026 — automatic rebate you also receive
Frequently Asked Questions
Is the S$50K AI cap per company or per YA?
Per YA. You can claim up to S$50,000 of qualifying AI expenses in each Year of Assessment (YA 2027 and YA 2028).
Can I claim AI expenses under R&D instead?
If your AI work qualifies as genuine R&D (technical uncertainty, novel development), you may claim it under the R&D category (S$400K cap) instead. However, you cannot claim the same expense under both R&D and AI categories.
Does the AI activity extend beyond YA 2028?
Currently, the AI activity is announced for YA 2027 to YA 2028 only. This aligns with the broader EIS sunset date.
What if my AI spending exceeds S$50K?
Only the first S$50,000 gets the 400% enhanced deduction. Any excess above S$50K may qualify for normal tax deduction (100%) under regular business expenses.
Can startups with no taxable income benefit?
Not directly from the AI activity, as there is no cash payout option. Startups should consider:
- Claiming AI R&D under the general R&D category (which has cash payout)
- Using PSG for pre-approved AI tools (cash grant, no tax dependency)
Related Guides
- Budget 2026 AI & Innovation Grants Overview — all AI and innovation changes at a glance
- Budget 2026 CIT Rebate & Cash Grant — 40% corporate tax rebate details
- AI Grants for SMEs — EIS, EDG, and ADS for AI adoption
- AI Grants for Deep Tech Startups — Startup SG Tech, EIS, EDG for AI R&D
- EIS Claim Checklist — documents and deadlines for EIS claims
- Grant Pitfalls Guide — common mistakes to avoid
- Singapore Grants Glossary — key terms and definitions
Scheme Pages
- Enterprise Innovation Scheme (EIS)
- Productivity Solutions Grant (PSG)
- Enterprise Development Grant (EDG)
Official Links
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