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.
Interest monies cannot be used to renovate a government hospital.
and Allah Ta’ala Knows Best
Mufti Ebrahim Desai