Paying Zakaah on Provident Fund
Fatwa No: 86229

Question

I am working in a multinational company and company holds 10% amount from my salary and add 10% amount from company's part and place this amount in Provident Fund account. This amount adds up every month and remains with the company till leaving company or getting provident fund for urgent needs like home purchase or hospitalization uses. Is there Zakah on Provident fund amount? What is rule to pay Zakah on this amount during the period in which it holded by company, or we will not pay Zakah on this amount and pay only then whenever this amount paid to us? How we calculate Zakah on PF and pay it as it is increasing month by month? Should we pay Zakah every year or wait till full encashment? What is the rule if I draw my provident fund for hospitalization emergencies or buying home for residence?

Answer

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad is His slave and Messenger.

The amount of money you are enquiring about is your own money, whether it is deducted from your salary or granted from the company. As long as it is not under your full possession, it falls under the rulings of the debt due on a procrastinator or a bankrupt. Zakaah in such debts is not due till the debtor receives the amount, then he has to pay Zakaah of only one year for the previous years. It is also permissible to take part in such schemes provided they fulfill the Islamic rulings. For instance, the deduction should be within the concernment of the worker, the amount should be invested only in lawful fields, the percentage of the profit should be fixed beforehand such as one third or one forth, etc., of the profit, and finally both of them should bear the loss and there should not be any guarantee of the capital. Whenever one falls short from fulfilling the above conditions, then it is unlawful to get involved willingly in such schemes. If there is no other choice, then one should not use the interest money but should get rid of it by giving it in general welfare of Muslims.

Allah knows best.

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