Home » Hanafi Fiqh » CouncilofUlama.co.za » Compulsory Deductions for Provident Fund

Compulsory Deductions for Provident Fund

Answered as per Hanafi Fiqh by CouncilofUlama.co.za

Q: Under the law of our country, all government and armed forces employees are subject to deposit a portion of their salary on monthly basis in Provident Fund Account. In turn, an interest of fixed or a varying rate is added in each employee’s account. On retirement, the employee gets his principal amount with interest. In some cases, lower limits for monthly deductions are fixed while no upper limit of deductions exists:

  1. a. Is interest on provident fund allowed?
  2. If this interest is not allowed, how can an employee get exemption on forced monthly deductions?
  3. If an employee wants to be safe and does not get interest on provident fund, how this interest should be accounted for and spent. As regards his principle amount, its value is reduced due to the currency de valuation. How can devaluation be catered for?

A:The forced monthly deductions will not be considered as part of the salary. Thus when the employee receives a large sum of money from the government on retirement it will be considered as a gift and the whole sum would be permissible for consumption.

Council of Ulama
Eastern Cape

This answer was collected from CouncilofUlama.co.za, which is operated under the supervision of Council of Ulama Eastern Cape, South Africa.

Read answers with similar topics: