Which Loan Payments Are Deductible for Zakat?

The capital repayment due for the forthcoming lunar year from a long-term bank loan can be excluded from the Zakat calculation.

This means that if you have a long-term loan, you can deduct a portion of it when calculating your Zakat.

Specifically, the amount of the principal that you are obligated to repay within the next lunar year can be deducted. It is important to note that only the principal repayment qualifies for this exclusion.

However, any interest component associated with the loan cannot be deducted from the Zakat calculation. In Islamic finance, interest (riba) is prohibited, so it does not form part of the deductible liabilities for Zakat purposes.

Therefore, while calculating Zakat, only the principal repayment due for the next lunar year is considered a valid deduction. The interest portion, however, must be excluded.

This distinction ensures that the Zakat calculation remains compliant with Islamic principles. It emphasizes the prohibition of riba and the fair and transparent treatment of financial obligations.

And Allah knows best!