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Fatwa CenterZakaah on loan kept in bank account
Question
Assalaamu alaykum. My Question is about the zakah on lended money which I keep at the bank for one lunar year. I wanted to purchase land in India, for which I saved some (1/2 amount) money, and I took a loan (1/2 amount) from Al-Rajhi bank (Saudi Arabia), but I did not invest it immediately as I did not get any suitable land, so the money which I saved and the loan which I took from the bank remains in my account for one year. Meanwhile, I pay the installments to the bank regularly. I invested the total amount of money after 13 months. My question is: should I pay the zakah on the amount of the loan, which I kept at the bank for one year? I also have gold the value of which has reached the Nisaab (minimum amount liable for Zakat). Regards, I will be awaiting your reply eagerly.
Answer
All perfect praise be to Allah, The Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad 
is His slave and Messenger.
Since the amount reached the Nisaab (minimum amount liable for zakaah) and it remained for a whole lunar year, then it is obligatory to pay zakaah on it. However, we have to look at the installments which you still owed to the bank when a whole lunar year elapsed on the amount; if you have other assets for personal use, such as a house or car or the like, which you do not need, then you put this against the debt (consider it debt collateral) and pay the zakaah on the entire amount. Otherwise, it is permissible for you to deduct the value of the debt installments from the amount and then look at what is left. If it is less than the Nisaab, then there is no zakaah on it, and if it is more than the Nisaab, then you pay zakaah on it.
The Fiqh Encyclopedia reads, “The scholars who say that the debt waives the zakaah in its amount, most of them conditioned that the person who pays the zakaah does not have (other) assets to pay the debt except the amount on which the zakaah is obligatory. So if he has other assets that are in excess of his basic needs, then he puts it against the debt so that the money on which zakaah is due becomes safe (free of liability), and then he pays its zakaah.” For more benefit, please refer to fatwa 116828.
There is no difference of opinion in regard to what we have mentioned between the due and deferred debt. Deferred installments are deducted from the debt just like the due debts. The author of Al-Iqnaa’ wrote, “There is no zakaah on a person who has a debt that consumes the Nisaab or reduces it while he does not find anything to pay the debt with except the Nisaab or other money which is indispensable to him … so zakaah is not obligatory on the debt amount, whether the debt is due or deferred in the hidden money, such as gold and silver and values of tradeable commodities…”
One narration from Imaam Ahmad says that it is only the due debt that is deducted; the author of Al-Insaaf said, “There is no zakaah on the money of a person who owes a debt that decreases the Nisaab. This is the view of the (Hanbali) School, except what he (Imaam Ahmad) excluded. It was also narrated from him (Imaam Ahmad) that debt does not prevent paying the zakaah at all, and in another of his opinions, it is only the due debt that prevents from paying the zakaah ... this opinion was decisively stated in Al-Irshaad and other books… ”
As regards gold, please refer to fatwas 87362 and 89106.
Allah knows best.
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