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Atta-ur-Rehman

Can Corporation Tax Be Deducted from Zakat Calculation?

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Yes, unpaid taxes from a previous financial year can be deducted from your Zakat calculation, but taxes saved for the current financial year cannot.

Unpaid taxes from a previous year are considered an existing liability and can be subtracted from your Zakatable assets. This aligns with the principle of deducting immediate and legitimate debts, as they reduce your disposable wealth. Such deductions ensure your Zakat calculation remains fair and accurate.

However, money set aside for taxes related to the current financial year is not deductible. These are future obligations and do not qualify as liabilities at the time of Zakat calculation. Since Zakat is based on the wealth you currently possess, only debts that are already due can be subtracted.

It’s also important to note that corporation tax is not classified as a Sharia-compliant debt. While it is a financial obligation, it does not fall under the category of deductible liabilities for Zakat purposes. Zakat focuses on the purification of wealth and its fair distribution, and corporation tax does not directly contribute to this objective.

For accurate Zakat calculations, you can deduct unpaid bills, outstanding wages, or debts due within the lunar year. If you are unsure about specific deductions, consulting a qualified Islamic scholar or Zakat expert is recommended to ensure compliance with Islamic principles.

And Allah knows best!

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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.