Answered by Shaykh Faraz Rabbani
Question: Is it permissible to receive welfare or other government benefits, even if one is not eligible but needs the money?Answer: In the name of Allah, Most Merciful.
Walaikum assalam wa rahmatullahi wa barakatuh
The Prophet Muhammad (Allah bless him and give him peace) said, “The one who cheats is not of us.” [Muslim, Tirmidhi, Abu Dawud, and others]
He also said (peace and blessings be upon him), “The one who does not fulfill trusts has no faith, and the one who does not fulfill commitments has no religion.” [Ahmad, with a sound chain of narrators]
It is permitted to receive welfare and unemployment insurance as long as:
a) one is actually eligible, and
b) one fulfills the conditions of eligibility.
Taking welfare and then working under the table is deception, which is not even permitted with one’s enemy in dealings, let alone with the government one is living under.
The Light of Creation, the Messenger of Allah (peace and blessings be upon him) said, “I was only sent to perfect noble character.” [Ahmad, and others]
It is wrong to cheat or deceive others–whether individuals or institutions. The Prophet (peace and blessings be upon him) made it clear that one is liable to repay any money obtained through such means. And while it is true that Islam clears the sins of one’s past this doesn’t lift any financial liabilities one has. [Khadimi/Birgivi, al-Bariqa Sharh al-Tariqa]