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Is it permissible to term interest money paid to bank as profit paid to bank? Is it permissible to claim insurance on a damaged vehicle in an accident?

Answered as per Hanafi Fiqh by AskOurImam.com

I am starting a transport and logistics company. As I live in India where there is strict tax rules so it is necessary for almost everyone to take loan on purchase of vehicles as nobody has such huge amounts of tax paid money. I asked a Mufti Saheb and he told me to make a deal orally with the bank manager of purchasing so and so vehicle from you in so and so instalments.

  1. Is it correct to do if we term the interest paid to bank as profit paid to bank in exchange to purchase of vehicle if bank manager agrees with it? It will be an oral conversation.
  2. What about claiming the insurance of a damaged vehicle in an accident without any fraudulent means?


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

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

  1. Your first question requires some clarity:
  • If you are required by the government to show you have taken out a loan to avoid taxation, how will an oral transaction suffice?
  • If the interest is regarded as a profit, will it be locked in or will it fluctuate? Explain in detail how the transaction will be conducted.
  • Will the bank manager agree to stipulate a set profit margin and not charge interest based on interest rate?
  1. As a case of principle, Islam renounces and forbids all types of Insurance[1]. However, if a person is legally obliged to take out insurance, it will be permissible for him to claim remuneration on the damage caused to his vehicle as long as the payment he receives from the Insurance Company does not exceed the amount he initially gave[2] and as long as the claim does not entail lying, deceiving or cheating the authorities.

And Allah Ta’āla Knows Best

Hanif Yusuf Patel

Student Darul Iftaa

Checked and Approved by,
Mufti Ebrahim Desai.



[1] [Al-Qur`an, 2: 278-9; Al-Qur`an, 5:90; Al-Qur`an, 2:275]

فان تأجيله لا يصح … وعلي اعتبار الانتهاء لايصح لانه يصير بيع الدراهم بالدراهم نسيئة وهو ربوا

[Al-Hidayah, 3:76]

يآ ايُّها الَّذين امنوا انّما الْخمر والميسر والانصاب والازلام رجس من عمل الشيطان فاجتنبوه لعلكم تفلحون

عن أبي هريرة قال نهي رسول الله عن بيع الحصاة وعن بيع الغرر

[Sahih Muslim: 3170]

ولا خلاف بين أهل العلم في تحريم القمار

[Ahkam al-Qur`an li al-Jassas, 2:465, Dar Ihya at-Turath al-Arabi, Beirut]

[2] [Contemporary Fatawa, 185-188, Idarah Islamiat, Karachi]

This answer was collected from AskOurImam.com, which is operated under the supervision of Mufti Hanif Yusuf Patel. He graduated from Jamiatul Ilm Wal Huda, Blackburn, U.K, with a distinction in Alimiyyah degree. He thereafter travelled to Darul Iftaa Mahmudiyyah Durban, South Africa, to train as a Mufti under the tutelage of Mufti Ebrahim Desai and Mufti Husain Kadodia.

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