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Atta-ur-Rehman

Is a Bank Loan Deductible from My Zakat Calculation?

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Yes, a bank loan can generally be deducted from your Zakat calculation.

Zakat is based on your net wealth, which is the total value of your assets minus your liabilities. Therefore, the amount you owe on your loan can be subtracted from your assets before calculating your Zakat.

Here are the key points to consider:

  • Capital Repayment Deduction: You can subtract your loan's capital repayment due for the forthcoming lunar year. This ensures you don't pay Zakat for the money you need to repay.
  • Interest is Not Deductible: Any interest component (riba) of the loan is prohibited in Islam and cannot be deducted from your assets when calculating Zakat.
  • One Year’s Repayment Permitted: Scholars permit the deduction of one year’s worth of repayments. This means you can subtract the amount you will pay over the next year from your Zakat calculation to reflect your financial obligations.

Thus, while you can deduct the outstanding loan principal from your assets, you cannot deduct the interest. Additionally, you can account for one year’s loan repayments to make the Zakat calculation fair and manageable.

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.