Answer
The excess on a fixed deposit is interest and strictly prohibited.
Interest monies must be given to the poor and needy who are eligible to
accept Zakaat without the intention of reward. However, interest received
from government institutes, eg. post office could be used to offset
government taxes. Interest received from private banks cannot be used to
offset taxes. It may be used to offset interest charged from the same bank.
and Allah Ta’ala Knows Best
Mufti Ebrahim Desai
FATWA DEPT.