Question: I received an interest-free student loan from the government, which I have to pay back in 2024, and I also owe money to my relatives, which I am currently paying back in installments. Some people say it is permissible to deduct your debts. Others say it is only permissible to deduct your monthly installments of the Zakah year. What is correct?
Answer:
Wa ‘alaykum assalam wa rahmatullah wa barakatuh,
I pray you are well.
You Can’t Deduct Deferred Loans
When it comes to loans and the calculation of zakat, you may deduct the loans which people are asking for or expecting immediate repayment of. For example, your student loan is not due until 2024, so you would not deduct it from this year’s zakat. Unless, however, you are paying installments on it now, in which case you may deduct the next twelve months’ installment value from your assets.
Non-Deferred Loans Can Be Deducted
However, if you owe someone money that is expected to be paid back as soon as possible, or within the coming year, you can deduct that from your assets (Kasani, Badai’ al Sanai’).
Repay Debts As Soon As Possible
It’s a good practice to try to pay off one’s debts as soon as possible. You don’t want to pass away owing someone money. The Messenger of Allah (Allah bless him and give him peace) said, “Allah forgives all the sins of the shahid – except debt” (Muslim). This doesn’t mean that loans are sins; rather it shows that even when sins are pardoned debts won’t be as they are connected to the rights of others.
May Allah grant you the best of both worlds.
[Shaykh] Abdul-Rahim
Checked and Approved by Shaykh Faraz Rabbani