Zakaah On Provident Fund

QUESTION:

My late father left me a provident fund as part of my inheritance. The current value is approximately R700 000. I have the option of withdrawing the entire amount at once, but doing so will result in a significant tax deduction. Alternatively, I can withdraw a percentage of the fund annually or monthly, which is the option I intend to follow.
If the provident fund is worth R700 000 but I only withdraw R50 000 during the year, is Zakaah payable on the entire R700 000, or only on the R50 000 that I have withdrawn and now have access to?

ANSWER:

Provident funds are of two types, viz. voluntary and compulsory. If the provident fund was compulsory and you had no choice in it, then the funds issued by the provident fund will be considered as a gift from the government/employer. You will not have to pay Zakaah on compulsory provident funds for the previous years you were invested with the fund. You will only calculate your Zakaah on the funds cashed out from your account for the current year, based on your personal financial situation. However, if the provident fund was voluntary, then it will not be permissible to partake of the fund since the majority of funds are invested in impermissible conventional financial institutions. One should dispose of the dividends accrued of such provident funds and pay Zakaah on the capital amount, beginning from the year one started investing in the pension fund. Therefore, one will pay Zakaah on the previous years on the capital amount invested if the provident fund was voluntary.
(RE: Nizamul Fatawa, vol. 1, pg. 208 Fatawa Haqqaniyyah, vol. 6, pg. 212 Jawahirul Fiqh, vol. 3, pg. 258, Fatawa Mahmudiyyah, vol. 16, pg. 395, Fatawa Rahimiyyah, vol. 9, pg. 271 Kifayatul Mufti, vol. 8, pg. 95-98,)

المبسوط للسرخسي (2/ 195) ر
ثُمَّ الدُّيُونُ عَلَى ثَلَاثِ مَرَاتِبَ عِنْدَ أَبِي حَنِيفَةَ – رَحِمَهُ اللَّهُ تَعَالَى -: دَيْنٌ قَوِيٌّ وَهُوَ مَا يَكُونُ بَدَلًا عَنْ مَالٍ كَانَ أَصْلُهُ لِلتِّجَارَةِ لَوْ بَقِيَ فِي مِلْكِهِ، وَدَيْنٌ وَسَطٌ وَهُوَ أَنْ يَكُونَ بَدَلًا عَنْ مَالٍ لَا زَكَاةَ فِيهِ لَوْ بَقِيَ فِي مِلْكِهِ كَثِيَابِ الْبِذْلَةِ وَالْمِهْنَةِ، وَدَيْنٌ ضَعِيفٌ وَهُوَ مَا يَكُونُ بَدَلًا عَمَّا لَيْسَ بِمَالٍ كَالْمَهْرِ وَبَدَلِ الْخُلْعِ وَالصُّلْحِ عَنْ دَمِ الْعَمْدِ فَفِي الدَّيْنِ الْقَوِيِّ لَا يَلْزَمُهُ الْأَدَاءُ مَا لَمْ يَقْبِضْ أَرْبَعِينَ دِرْهَمًا فَإِذَا قَبَضَ الْمِقْدَارَ أَدَّى دِرْهَمًا وَكَذَلِكَ كُلَّمَا قَبَضَ أَرْبَعِينَ دِرْهَمًا، وَفِي الدَّيْنِ الْمُتَوَسِّطِ لَا يَلْزَمُهُ الْأَدَاءُ مَا لَمْ يَقْبِضْ مِائَةَ دِرْهَمٍ فَحِينَئِذٍ يُؤَدِّي خَمْسَةَ دَرَاهِمَ، وَفِي الدَّيْنِ الضَّعِيفِ لَا تَلْزَمُهُ الزَّكَاةُ مَا لَمْ يَقْبِضْ وَيَحُولُ الْحَوْلُ عِنْدَهُ.

ALLAH TA’ALA ALONE IN HIS INFINITE KNOWLEDGE KNOWS BEST!

ANSWERED BY:

Mufti Ahmed Saeed

Date: 06 Safar 1448 / 27 July 2026

CHECKED AND APPROVED BY:

Mufti Yacoob Vally Saheb