Title: Investing in PPF to save income tax

Question: I was working as a government servant in India, in order to save tax, I had to invest some money in PPF. Money cannot be withdrawn for seven years? Do I need to pay zakah on this saving? (2) Is the interest of PPF similar to GPF of government servants? In one fatwa, it was written that GPF interest does not come under the category of haram, and hence can be used personally?

Answer ID: 66062Posted on: Sep 1, 2020

Bismillah hir-Rahman nir-Rahim !

(Fatwa: 894/876/SN=09/1437)

(1) The money invested in PPF is yours and you are its sole owner hence zakah shall be wajib on them if the conditions that make zakah wajib are found. But you will have to pay its zakah after you receive it i.e. you will have to pay the zakah of previous years after you receive the amount. Hence it is better that you pay the zakah of that amount along with your other zakah so that you are not under heavy burden later.

Note: It should be noted that you will have to pay only the zakah of your own money which you have deposited, not on the additional amount.

(2) PPF (Public Provident Fund) is completely optional. One invests one’s own amount in the related institution itself hence the interest which is levied on it shall be interest as per the government rules as well as according to Shariah. Hence it is not lawful to use it, rather it should be given to poor and needy people without the intention of reward. Whereas the interest which is received in GPF, it is interest as per the Government rules but not as per the Shariah rules, as the amount is deducted before it comes into the possession of employee and the employee is not owner of his wage before taking it into his possession. According to the Shari’ah, the definition of interest does not apply to the addition made on the amount which one did not own, rather it is a kind of bonus. Hence the employee may take the advantage of it.