Fatwa on Tax Savings

The purpose of savings is to derive benefit for the future, our future includes the life of the hereafter.
For prescribing medicine people would approach doctors not engineers, for building a house the expert is an engineer/architect not a doctor, For each branch of information/knowledge one has to rely on its experts. [ read more about fatwa ]


The Question
I’ve a question regarding the payment of taxes in my country.
With what I am earning today, I am eligible to pay the Income Tax in my country. Now my question to you is can I exploit the IT rules so that I don’t have to pay the tax or pay minimum tax. Whats the ruling in shariah for this?
The Fatwa (link)
Principally, income tax is not a legitimate Shar’ee tax which may be imposed by an Islamic state. However, if a person chooses to adopt the nationality of a non-Muslim country, then he is morally obligated to obey the rules of that country. This is in keeping with the teachings of Nabi [sallallaahu alayhi wasallam] that a Muslim should not behave in such a manner that will bring himself (and Islam) into disrepute (a sure outcome of tax evasion).
However, we sanction tax planning which is employing concession, rebates, etc. available to the taxpayer within the country’s tax framework in order to minimize the tax liability.

and Allah Ta'ala Knows Best

Mufti Ebrahim Desai

Life insurance policies (fatwa).

Given the situation of being in this part of the world where income tax is fact of life, one has to plan to make effective use of available concessions.
The fatwas are given on a case to case basis, it may not necessarily apply to all, so what I did is.
  1. Found a learned Mufti whom i can trust and as i understand cares about matters of my Akhira and Duniya
  2. Met him, explained my situation sought his guidance and got a verdict
So regarding my tax saving plan he said it is permitted provided the following conditions are met
  1. Intent is only to save Tax
  2. I should get rid of what ever extra returns i get, by giving to needy/poor/building roads/other public welfare etc, understanding well enough that i am giving away the filth in the money and no reward for charity is to be expected ( If i invest 10K total and i get back 11K then 1K i have to give away as it is filth in my money, which would destroy my Akhirah)
  3. There would be reward from Allah for obeying the above command of getting rid of filth in the money ( which could insha allah be even more than what would be getting as giving charity of same amount based on the sincerity of a person )
Mufti Muzammil, Madrasa Manjeri

This Fatwa is not for every one, its better to ask A Mufty directly, finding a right Mufti would take talking to a lot of people and making duas.

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