QA-ID-0049
QUESTION
Please could you do a post on zakat deductions with some modern examples. Council tax? Phone bills? What term of debt can be deducted and cannot be. Long term vs short term.
ANSWER
﷽
The following is a brief summary on liabilities that can be deducted from the total zakātable amount:
LOANS OWED TO OTHER INDIVIDUALS WHETHER LONG TERM OR SHORT TERM:-
- A loan that a person owes to another individual is entirely deductible as long as you intend to pay it back. These debts are considered demandable at any point irrespective of any agreements between the parties. Example: you owe someone £500. You can deduct the entire £500 from your total calculation.
- If someone owes you money, you CANNOT deduct this from your total amount. Money given out by you as loans to others is zakātable and you should include it in your total even if it is not yet received. This is the easiest way and saves a person having to backdate the amount when he actually receives the amount. Example: someone owes you £1000. You will include this £1000 in your total calculation. A security deposit given for a house falls into this category.
LONG TERM LOANS PAYABLE AS INSTALLMENTS TO COMPANIES AND BANKS:-
Long term loans payable as installments to companies and banks should not be deducted in their entirety. These debts are not considered demandable in full. Instead, only the installments payable until the next zakāt year can be deducted. This includes the following:
- Conventional mortgages: installments due until the next zakāt date are deductible. Only the principal amount is deductible and not any interest element of the payment. If your mortgage is an interest only mortgage, you should not deduct any amounts from your total calculation.
- Car finance payments: installments due until the next zakāt date are deductible. Only the principal amount is deductible and not any interest element of the payment.
- Other items purchased on finance including phones, appliances etc.: installments due until the next zakāt date are deductible. Only the principal amount is deductible and not any interest element of the payment.
MONTHLY BILLS FOR SERVICES:-
Monthly bills for services are not deductible as they are not debts. This includes the following:
- Mobile phone contract bills
- Energy bills
- Broadband bills
However, a bill that becomes due to pay before the annual zakāt date that has not yet been paid is deductible.
OTHER DEDUCTIBLE DEBTS:-
- Council Tax: after receiving the liability letter, council tax becomes a debt owed to the council for the upcoming year and is immediately payable, though it can be settled in installments. The remaining installments can be deducted from your overall calculation.
- Overdue bills (arrears) are entirely deductible.
NOT DEDUCTIBLE:-
- Insurance payments of any kind are not deductible.
- Car lease payments for the year are not deductible, since lease payments are not a debt. However any installment that has become due to pay before the zakāt date which is still outstanding can be deducted.
- Rent payments for the year are not deductible, since rent is not considered a debt. However any installment that has become due to pay before the zakāt date which is still outstanding can be deducted.
The above points have been gleaned from classical and contemporary fiqh texts, with consideration for current lifestyle habits. A comprehensive paper on the nature of long-term and short-term debt liabilities will be released in the near future – in shā Allāh.
والله تعالى أعلم
And Allāh Knows Best
Muhammad Kalim Misbahi
