Is tax money considered form of a Zakat ?

Question:

Is tax money that goes to the state and federal government considered a form of zakat since that money is used to feed the poor, for education and infrastructure etc. Retirement offer through work (benefits can fluctuate), if counted as zakat will place the account in the negative. How does one calculate these “future assets” when paying annual zakat? Answer: ﺑﺴﻢ اﷲ اﻟﺮﺣﻤﻦ اﻟﺮﺣﯿﻢ In the name of Allah, the Most Gracious, the Most Merciful

No, the money given in tax will not count as zakat because paying taxes has no relation with Zakat. Zakat is an act of worship and a right of Allah ﺗﻌﺎﻟﻰ, whereas tax is money you pay to the government. Thus, by paying one (tax) the other (Zakat) will not be fulfilled (Fatawa Usmani: v. 2, p. 69 [Maktaba M’aariful Quran Karachi]). Furthermore, in order for the zakat to be valid, the giver of zakat must transfer complete ownership of the wealth to the one who is eligible to receive it, e.g. a faqir Muslim (someone who does not posess nisab). It is obvious that the government does not take these conditions into consideration when utilizing wealth that was acquired through taxes. If the government used the “Zakat” money for infrastructures or gave it to non-Muslims, despite them being poor, it would be invalid (Al-Ikhtiyar li Taleel Al-Mukhtar: v. 1, p. 118-120 [Matba’ah Al-Halabi Al-Qahira]) If the value of the share you invested in for your retirement plan reaches nisab (either individually or when you add its value to other assets) after deducting liabilities, Zakat will become necessary (Fatawa Usmani: v. 2, p. 71 [Maktaba M’aariful Quran Karachi]). For example: Zaid invests $20,000 in a 401K plan (it is important to note that a Muslim must ensure the nature of the company he is investing in is permitted in Islam), and his employer vests $10,000. On his Zakat date, Zaid’s share in the company’s stock is worth $30,000, hence he will pay 2.5% of $30,000. There are two ways you can give Zakat on 401K: 1) It may be given annually by calculating the value of the 401K on your Zakat date and adding it to your other assets, e.g. gold, silver, cash, and business merchandise. 2) When you withdraw the funds (i.e. after retirement or a premature withdrawal which will incur fees), you give the Zakat of 401K for all the previous years. The first method is easier to practice upon, however if you choose the second option, ensure you keep track of all assets in order to avoid any miscalculation when discharging the Zakat of your 401K.

Only Allah knows best

Written by Maulana Mohammad Ahsan Osmani Checked and approved by Mufti Mohammed Tosir Miah Darul Ifta Birmingham