Budget 2026 (Annexes B-1 and C-1) delivers significant enhancements to Singapore’s AI and innovation support. Here’s what changed, when it takes effect, and how it affects your business.
What Changed Across AI & Innovation Support?
| Before Budget 2026 | After Budget 2026 | Effective | |
|---|---|---|---|
| EIS qualifying activities | 4 categories (R&D, IP, Innovation, Training) | 5 categories (+AI Expenditures) | YA 2027 |
| EIS AI deduction | No separate AI category | 400% on first S$50K AI spend/YA | YA 2027 – YA 2028 |
| PSG AI coverage | Standard pre-approved IT solutions | Wider digital and AI-enabled solution coverage; IMDA AI-enabled solutions increasing from 30% to 50% | From 2026 rollout |
| CIT rebate | None | 40% rebate + S$1,500 cash grant, total maximum benefit S$30K (YA 2026) | YA 2026 / 2Q CY2026 |
| Cash grant | None | S$1,500 for companies with at least one local employee in CY 2025 | 2Q CY2026 onwards |
When Do These Changes Take Effect?
| Changes | |
|---|---|
| 2Q 2026 | S$1,500 cash grant auto-disbursed to companies meeting local employee condition in CY 2025 |
| YA 2026 | 40% CIT rebate applied to tax assessment (total maximum benefit S$30K including cash grant) |
| YA 2027 | EIS AI activity takes effect — 400% deduction on S$50K AI spend |
| Mid-2026 | IRAS expected to publish detailed EIS AI guidelines |
| 2026 | PSG AI-enabled solution coverage expands through EnterpriseSG and IMDA pre-approved solution lists |
How Does This Affect EIS Claims?
The biggest EIS change: a 5th qualifying activity for AI expenditures with a separate S$50,000 cap per YA.
- 400% tax deduction on the first S$50,000 of qualifying AI spending
- S$34,000 in potential tax savings per year (at 17% CIT rate)
- Separate from R&D cap — you can claim both R&D (S$400K) and AI (S$50K) in the same YA
- No cash payout for the AI activity — you need taxable income to benefit
Key note: The S$50K AI cap is a standalone 5th activity, not a sub-cap within the existing R&D category.
For full details: EIS Budget 2026 AI Changes Explained
How Does This Affect PSG?
Budget 2026 announced that PSG will be expanded to support AI adoption for SMEs (Annex C-1 (E)). The expansion covers AI-enabled solutions across multiple business functions, making it easier for SMEs to adopt AI tools through the familiar PSG framework.
What We Know
- PSG will be expanded to support a wider range of digital and AI-enabled solutions for businesses
- IMDA will increase the proportion of pre-approved AI-enabled PSG solutions from 30% to 50%
- The existing PSG framework is expected to apply: pre-approved vendors, up to 50% support, S$30K annual cap
- The GenAI Navigator helps SMEs identify pre-approved AI tools matched to business needs
- Existing PSG pre-approved solutions remain available while EDGE is prepared for launch in 2H2026
What This Means for SMEs
- Lower barrier to AI adoption — pre-approved AI solutions mean no need to evaluate vendors from scratch
- Familiar application process — same BGP submission, same documentation as current PSG
- Complements EIS AI activity — use PSG for off-the-shelf AI tools, EIS for custom AI development
PSG AI vs EIS AI: Which to Use?
| Need | Use | Why |
|---|---|---|
| Pre-approved AI software (CRM, accounting, chatbots) | PSG | Cash grant, fast approval, no R&D required |
| Custom AI development or AI SaaS subscriptions | EIS (AI activity) | 400% deduction on S$50K, no pre-approval list |
| AI R&D with technical uncertainty | EIS (R&D activity) | 400% deduction on S$400K |
| Large-scale AI transformation project | EDG | No cap, covers consultancy + manpower |
For current PSG information: Productivity Solutions Grant (PSG)
CIT Rebate & Cash Grant
Budget 2026 provides immediate corporate tax relief, with cash grant eligibility tied to the local employee condition:
- 40% CIT rebate on tax payable for YA 2026, with total maximum benefit of S$30,000 (including cash grant)
- S$1,500 cash grant for companies with at least one local employee in CY 2025 (auto-disbursed from 2Q CY2026)
- No application needed — both are automatic
| CIT Payable | Rebate (40%) | Cash Grant | Total Benefit |
|---|---|---|---|
| S$0 | S$0 | S$1,500 | S$1,500 |
| S$30,000 | S$12,000 | S$1,500 | S$13,500 |
| S$100,000+ | S$28,500 | S$1,500 | S$30,000 (max) |
For full details: Budget 2026 CIT Rebate & Cash Grant Explained
Other AI Initiatives in Budget 2026
Budget 2026 also announced several broader AI initiatives. Some are policy and infrastructure measures rather than grant applications, but they shape which sectors and AI use cases receive support:
- AI Missions: Government-led AI deployment in advanced manufacturing, connectivity and logistics, finance, and healthcare
- National AI Council: New advisory body to guide Singapore’s AI strategy
- Champions of AI: EnterpriseSG and DISG programme for enterprise-wide AI transformation
- Kampong AI at LaunchPad @ One-North: Physical work-live-collaborate hub for AI startups and companies
- NAIIP and TeSA expansion: Support for 10,000 enterprises and 100,000 AI Bilingual workers over three years
- Free premium AI tool access: Six months of access for Singaporeans who complete selected AI training courses
These initiatives support Singapore’s AI ecosystem but do not involve direct grant applications for businesses.
Which Grant Should You Use Post-Budget 2026?
| Need | Best Option | Why |
|---|---|---|
| AI tool subscriptions and SaaS | EIS (AI activity) | 400% deduction on S$50K, no pre-approval |
| Pre-approved AI solutions | PSG | Cash grant, S$30K cap, fast approval |
| Custom AI development project | EDG | No cap, covers consultancy + manpower |
| AI R&D with technical uncertainty | EIS (R&D activity) | 400% deduction on S$400K |
| General tax relief | CIT Rebate | Automatic, no application needed |
What Should You Do?
- Track all AI spending from 2026 onwards — keep receipts for AI software, cloud AI, and consultancy. IRAS guidelines are expected mid-2026
- Decide PSG or EIS for AI tools — use PSG for pre-approved off-the-shelf AI solutions, EIS for custom AI development or SaaS subscriptions
- File your YA 2026 tax return on time — the 40% CIT rebate and S$1,500 cash grant are applied automatically
- Use the GenAI Navigator and PSG catalogue — check whether your AI tool is already pre-approved before considering EIS or EDG
Frequently Asked Questions
Can I claim both EIS R&D and EIS AI in the same year?
Yes. The AI activity has a separate S$50,000 cap from the R&D S$400,000 cap. You can claim both in the same YA, but cannot claim the same expense under two categories.
Is the CIT rebate automatic?
Yes. The 40% rebate is applied to your YA 2026 tax assessment automatically. The S$1,500 cash grant is auto-disbursed in 2Q 2026 to companies meeting the local employee condition. No application needed for either.
How do I find PSG-supported AI tools?
Use the GoBusiness PSG catalogue and IMDA’s GenAI Navigator. PSG still works through pre-approved solutions, so check the official listing before you ask a vendor for a quote.
What if my company has no taxable income?
The EIS AI activity has no cash payout option — you need taxable income to benefit. Consider using PSG (cash grant, no tax dependency) or claiming AI R&D under the general EIS R&D category (which has cash payout).
Related Guides
- EIS Budget 2026 AI Changes Explained — detailed EIS AI activity old vs new with worked examples
- Budget 2026 CIT Rebate & Cash Grant — full rebate and cash grant details
- Budget 2026 Internationalisation Grants — MRA, DTDi, BizAdapt, EFS changes
- AI Grants for SMEs — EIS, EDG, ADS comparison for AI adoption
- PSG or EDG for AI? — decision matrix for AI grant selection
- Agentic AI Governance Checklist — controls before deploying AI agents
- AI Grants for Deep Tech Startups — Startup SG Tech, EIS, EDG for AI R&D
- Grant Pitfalls Guide — common mistakes to avoid
- Corppass Setup Guide — required for BGP applications
- 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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