Zakat Calculator (and Studet debt UK)

Everyday Islamic Finance Personal and Family Finance
#1

Bit confused on the IFG Zakat calculator

I have put in all my assets and the full amount of student debt i have to have to pay but the amount comes out is zero. So 2 questions

  1. Say (example numbers) including pension you have £5k of assets in 21, this year you have £7k total so when it says "do zakat on assets you have held over a year) do you calculate 2,5% on the 7k total as it is today or £2k as you already paid it on the £5k last year?

2.5) The other issue is pensions, the Zakat calculator is doing zakat on the pension pot but my local scholar says you don’t as it is no in your possession until 65. This is DC pension

  1. When doing the calculation Total Zakat due = (Zakatable assets - What I owe) x 0.025 since no on really pays off student debt and it is canceled in 20 odd years. Do you do the entire amount of debt or just what you owe to them in the next year? Or total over the next 20 odd years left not including interest? As otherwise Zakat is 0.

guessing it works in the same principle as mortgages?

#2

Assalaamu alaykum,

You should not deduct all of the student debt.

  1. You pay on 7k

  2. Our view is Zakat is due on the pension as it is something you own and it is an investment. However, because you don’t have it with you at present, you have the option to pay now or pay when you receive the money for the previous years.

Allah knows best

#3

Thank you

So to confirm for DB pensions you defiantly do not pay Zakat on it, but for DC (inshallah) in 40 odd years time i take the amount i receive each year and do zakat on that?

And the question on Student debt how does that work on what you deduct:

Do you deduct the total amount or just 12 months after? Because i red this on IFG also “On the other hand, it is not permissible to deduct any part of a debt repayment from the zakat calculation according to the Shafi’is.”

Also side note what do you do if the zakat you have to pay is more than you monthly paycheck can you pay it incrementally or do you have to sell the assets to make up the remaining money?

#4

Yes, on DB, there is no Zakat.

On DC, we advise to pay annually to ensure the obligation is fulfilled. However, if you were to wait and pay until you withdraw, then that is acceptable but you must pay for all previous years. You should also add this into your will.

Yes, according to the Shafi⁩’i school, debts cannot be deducted. Contemporary Hanafi jurists have given fatwa on the allowance to deduct 12 months worth of repayments.

#5

Thank you and if you Zakat is more than your monthly paycheck do you need to sell assets to give all Zakat in 1 go. Or can you pay over a few months?