IslamQA

Is it required to pay zakat on provident fund amount?

Answered according to Hanafi Fiqh by Askimam.org

Is it required to pay zakat on provident fund amount?

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh

Provident funds are of two types: voluntary and compulsory. If the provident fund was compulsory and you had no choice, then the funds issued by the provident fund will be considered as a gift from the government/employer. You will not have to pay Zakaat on compulsory provident funds for the previous years you were invested with the fund. You will only calculate your Zakaat on the funds received for the current year based on your personal financial situation. However if the provident fund was voluntary, then it will not be permissible to participate in the fund since the majority of funds are invested in impermissible conventional financial institutions. One should dispose of the dividends accrued of such provident funds and pay Zakaat on the capital amount beginning from the year one started investing in the pension fund. Therefore one will pay Zakaat on the previous years on the capital amount invested if the provident fund was voluntary.

And Allah Ta’āla Knows Best

Ismail Desai,

Darul Iftaa

Checked and Approved,

Mufti Ebrahim Desai.

This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

Find more answers indexed from: Askimam.org
Read more answers with similar topics:
Subscribe to IslamQA Weekly Newsletter

Subscribe to IslamQA Weekly Newsletter

You will receive 5 Q&A in your inbox every week



We have sent a confirmation to you. Please check the and confirm your subscription. Thank you!