Zakaat on loans

Category: 

Zakaat & Charity

According to Madhhab: 

Hanafi

Reference: 

1440-498

Question: 

As
an employee, I am facilitated to take 3 types of loan from my employer.

Loan type 01:

This loan is termed as 'Salary Advance'. In case of emergency, The employee can
take loan from the employer maximum 6 times of his basic salary. The lent
amount will be deducted from the monthly salary in 12 installments.If the
employee leaves the job before the settlement of the loan, then the left amount
will be deducted from the gratuity scheme, provident fund etc.

Loan type 02:

This loan is termed as 'Investment loan'.The employee will receive an amount
every year on 1st of June from the employer/company to invest in some
particular investment schemes to get tax rebate on yearly income received from
the company.The lent amount will be deducted from the monthly salary in 12
installments. If the employee leaves the job before the settlement of the loan,
then the left amount will be deducted from the gratuity scheme, provident fund
etc.

Loan type 03:

The employee can take loan from the compulsory provident fund. The lent amount
will have to be adjusted as per agreement with the company.If the employee
leaves the job before the settlement of the loan, then the left amount will be
deducted from the gratuity scheme, provident fund etc.


My question is :

With a view to calculating zakaat of these loans, how will the lent amounts be
considered? Whether asset or liability or Amaanat?

Answer: 

Short-term loans are considered a liability for the debtor/borrower and considered as an asset for the creditor/lender; therefore, the former will not be liable to calculate the lent money amongst Zakatable assets, rather he will deduct the lent amount as liability from the Zakat amount and the latter will be liable to discharge Zakat of the money given as loans. (Fathul Qadeer Vol. 2 Pg. 117, Shaami Vol. 2 Pg. 305) 

However, in long-term loans, the debtor/borrower will only deduct the installment of one year from the Zakat amount and the creditor/lender will discharge the Zakat of the lent amount. For instance, if all of one’s Zakatable asset equals to the value of 200,000/- Bangladeshi Taka and one is also indebted with a loan of Tk100,000/- which will be paid in installments, that is Tk10,000/- each year, then only Tk10,000 will be deducted as a liability and he will pay his Zakat on the remaining Tk190,000. (Darse Tirmizi Vol. 2 Pg. 479, Mahmoodul Fataawa Vol. 2 Pg. 37) 

In short, where one is indebted with short-term loans he will deduct the entire amount of the loan from Zakatable assets and in long-term loans, only the current year’s installment will be deducted; however, in both cases, the creditor/lender will be liable to discharge the Zakat of the money that he has lent to others. (Kifayatul Mufti Vol. 4 Pg. 251) 

Henceforth, in the enquired scenario, the employee will not be liable to discharge the Zakat of the borrowed money; rather he will deduct the borrowed amount as a liability and will only pay Zakat if the remainder is equal or more than the Nisaab amount. 

Note: This Fatwa is only regarding Zakat related rulings not regarding loans and their permissibility; therefore, to find out if the available loan schemes are permissible or not, you are advised to enquire from your local Ulema regarding these loan schemes and their permissibility. 

AND ALLAH TA'AALA ALONE IN HIS INFINITE KNOWLEDGE KNOWS BEST
ANSWERED BY:  MOHSIN KHAN


CHECKED AND APPROVED BY: Mufti Muhammed Saeed Motara Saheb D.B. 
Islamic Date:٢١ شوال ١٤٤٠  English Date: 25 June 2019

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