A Landmark Year for AI Funding
Singapore's Budget 2026 represents the most significant government commitment to AI adoption for SMEs in the nation's history. With expanded grants, enhanced tax incentives, and new dedicated funding pools, the message is clear: the government wants every viable SME to have access to AI — and they're putting serious money behind it.
For SMEs that have been hesitant about the cost of AI implementation, Budget 2026 effectively removes the financial barrier. Here's everything you need to know.
Productivity Solutions Grant (PSG) — Expanded for AI
The Productivity Solutions Grant has been a cornerstone of SME digitalisation in Singapore, and Budget 2026 significantly expands its scope for AI-related solutions:
- Up to 50% funding support for qualifying AI solutions and implementation services
- Expanded eligible categories now include machine learning deployment, NLP solutions, computer vision systems, and AI-powered analytics platforms
- Higher grant caps for AI-specific projects, reflecting the higher implementation costs compared to basic digitalisation
- Streamlined application process with faster approval timelines for pre-approved AI solution providers
PSG Eligibility Criteria
To qualify for PSG funding, your business must:
- Be registered and operating in Singapore
- Have a minimum of 30% local shareholding
- Have group annual sales turnover of not more than $100 million, or group employment of not more than 200 workers
- The solution must be used in Singapore
400% Tax Deduction for AI Investments
One of the most impactful measures in Budget 2026 is the 400% tax deduction for qualifying AI expenditures. This means for every dollar you spend on AI implementation, you can deduct four dollars from your taxable income.
Qualifying expenditures include:
- AI software licensing and subscription costs
- Custom AI model development and deployment
- AI-related training and upskilling for employees
- Data infrastructure improvements necessary for AI deployment
- Consultancy fees for AI strategy and implementation planning
Combined with the PSG grant, the effective cost of AI implementation for eligible SMEs can be reduced by 70-80%. A $100,000 AI project might effectively cost your business less than $25,000 after grants and tax benefits.
IMDA AI Programmes
The Infocomm Media Development Authority (IMDA) has launched several complementary programmes under Budget 2026:
- AI Apprenticeship Programme: Subsidised placement of AI professionals in SMEs for 6-12 months, with IMDA covering up to 70% of the salary costs
- AI Ready Programme: Free AI readiness assessments and workshops for SMEs considering AI adoption
- Accredited AI Solutions: A curated marketplace of pre-vetted AI solutions tailored for specific SME use cases, with simplified grant applications
ASME $10M AI Grant Pool
The Association of Small & Medium Enterprises (ASME) has established a dedicated $10 million grant pool specifically for AI adoption among its members. Key features:
- Individual grants up to $50,000 for AI pilot projects
- Sector-specific tracks for retail, F&B, manufacturing, and professional services
- Mentorship included — each grant recipient is paired with an AI implementation mentor
- Quarterly application cycles with dedicated review panels
How to Apply: A Step-by-Step Guide
Step 1: Assess Your Readiness
Before applying, determine your AI readiness level. Take advantage of IMDA's free AI Readiness Assessment to understand where you stand and what support you need.
Step 2: Identify Your Use Case
Grant applications are significantly more successful when they target a specific, well-defined business problem. Work with an implementation partner to identify the highest-impact use case for your business.
Step 3: Choose a Pre-Approved Solution or Partner
For PSG applications, working with a pre-approved vendor significantly speeds up the process. Check the GoBusiness portal for the latest list of approved AI solutions and implementation partners.
Step 4: Prepare Your Application
Key elements of a strong grant application:
- Clear description of the business problem being addressed
- Detailed implementation plan with milestones
- Expected outcomes with measurable KPIs
- Quotations from solution providers
- Company financial statements (last 2 years)
Step 5: Submit and Follow Up
Submit through the Business Grants Portal (BGP) for PSG applications. ASME grants have their own application portal. Typical processing time is 4-6 weeks for PSG and 6-8 weeks for ASME grants.
How fhd.work Helps You Navigate the Process
At fhd.work, we don't just implement AI — we help you access the funding to make it happen. Our team has extensive experience with Singapore's grant ecosystem:
- Grant advisory: We assess which grants you're eligible for and which combination maximises your funding
- Application support: We help prepare and submit grant applications, including the technical documentation and implementation plans
- Pre-approved solutions: Several of our AI solutions are pre-approved under PSG, enabling faster approval
- End-to-end implementation: From grant application to AI deployment, we manage the entire process
Don't leave money on the table. The grants available in 2026 are the most generous ever offered for AI adoption. If you're considering AI for your business, now is the time to act.