Zakat Questions and Answers
Examples: Every payday, a portion of Yusuf's salary goes directly into a pension fund. Since he never actually possessed the money, he owes no zakat on the money that is accumulated in it. Once he receives the money he is liable for zakat.
Tayyib set up a pension fund to which he contributes £20 a month. He has to pay zakat on the money that accumulates in the fund since his contributions comes from money he possessed.
Do I pay zakat on my pension fund?
There are two ways in which a pension can be funded:
- Payments are deducted from a salary before it comes into the possession of the contributor
- The contributor makes payments from money that has already come into his possession
If the payments are deducted from the salary at source so that the money never comes into the possession of the contributor, no zakat is due on the payments, nor is it due on the amount that accumulates in the pension or provident fund.
Zakat will only become payable when money from the fund is paid out and received by the contributor.
If the payments are made after the money has come into the possession of the contributor then zakat is payable on the money that accumulates in the fund.