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Can we adjust interest from LIC/VPF against income tax deducted by company?

Answered as per Hanafi Fiqh by Darulifta-Deoband.com
I am in government service. My company deduct certain amount as income tax from my monthly salary. We are investing some amount in LIC,VPF etc for saving income tax, in which we get interest also. (VPF – Voluntary Provident Fund, after receiving salary we invest in it with our own company). In both the cases interest got credited to our accounts, which we normally gets after maturity. In VPF company credited interest to my account on monthly basis,while in LIC we got whole amount along with interest on maturity. My Questions: 1) Whether we can adjust interest due/received from LIC and VPF against the income tax deducted by the company? 2) Whether we can adjust income tax against interest received from any of the above source.(Either LIC or VPF) 3) Certain company allow its employees to deposit income tax at their own and produce a proof of deposit. In such a case, can I deposit the income tax of other person from the amount of Interest due to me and than taken back the same amount from him. Is it Ok? We have to pay huge amount as Income Tax, other persons are taking home loan on interest. Whatever a person repays loan interest to bank, government gives income tax benefits on it. In this situation can I take Home Loan and avoid income tax and pay Interest amount of the Loan from the Interest I am getting from my savings.


(Fatwa: 1741/D=377/k=1431)

This type of LIC and VPF mentioned in the question is interest-based investment which has been declared unlawful by the holy Quran. It is haram to avail it with the intention of investment. If one has availed the LIC by chance in compulsion approved by Shari’ah, then too the ruling is that it is wajib on him to give the extra amount (other than the capital) in charity. The charity should be made without the intention of reward.
(1 & 2) If one received the amount of such interest and he has to pay some income tax amount that is due on him, according to some Ulama it is lawful to pay it in the income tax but not only through paper and mental calculation but practically the interest amount should be paid in income tax.
(3) It is not allowed for you to pay the interest of your account, to the income tax of any other person. It shall be useless to take the money in its return because the amount that you will receive from that person would be interest for you. It shall be wajib on you to give this amount in sadaqa like the one in answer number 1.
(4) It is not lawful to take loan on interest in order to save oneself from the income tax. One shall be sinful for interest-based dealing and the curse of interest shall creep in all the money and business. Almighty Allah says in the holy Quran:
يَمْحَقُ اللّهُ الْرِّبَا . [البقرة : 276]

Allah (Subhana Wa Ta’ala) knows Best

Darul Ifta,
Darul Uloom Deoband

This answer was collected from the official ifta website of Darul Uloom Deoband in India.

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