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Yes, defined contribution pension schemes are subject to Zakat, while defined benefit schemes are not.
The following are the steps to calculate zakat on a defined contribution pension scheme:
The first step is to identify the Zakatable assets within your pension fund. These include all assets that are subject to Zakat, like cash, stocks, and investments that comply with Islamic principles.
After identifying the assets, determine the percentage of the fund that is Zakatable. This means evaluating the portion of the fund that meets the criteria for Zakat.
Once the Zakatable portion is determined, you calculate Zakat due by multiplying this percentage by 2.5%. This is the standard rate for calculating Zakat.
What are Defined Contribution Schemes?
Defined contribution pension schemes are a type of retirement savings plan. The amount you receive upon retirement depends on your contributions and investment performance.
Some common types of defined contribution schemes include:
Hence, Zakat is indeed applicable to defined contribution pension schemes. Always ensure to assess the Zakatable assets properly to calculate the correct amount.
And while you fulfill this spiritual obligation, consider directing your Zakat towards those who need it most. Pakistan Sweet Home remains a trusted place to donate for orphanage causes, ensuring your contribution reaches deserving orphaned children with transparency and compassion.
And Allah knows best!
WRITTEN BY
Atta-ur-Rehman
Atta-ur-Rehman, a specialist in Fiqh from Fazal-Jamiat-ul-Uloom-ul-Shariah, Jama'at ul-Umar Karachi, is an expert in Islamic jurisprudence. His expertise spans various aspects of Shariah, including Zakat, financial rulings, family laws, and ethical guidance in everyday life. With a deep understanding of Islamic principles, he provides a reliable insights into matters of faith, worship, and personal obligations.
