Is zakat due on provident fund? On the compulsory part of a GP fund or provident fund, many Hanafi muftis in Pakistan, following Mufti Muhammad Shafi, say no zakat is due until you receive it, and none is due for past years when you do. After receipt it joins your savings and is counted at 2.5% on your zakat date. On voluntary contributions scholars differ, and many say zakat is due on them every year.
Enter your cash and bank balances here. Leave out a compulsory fund you cannot yet withdraw if you follow the view below; add a fund you have received, or your voluntary part if your scholar counts it, to the bank box.
Why is a provident fund treated differently?
Zakat is due on wealth you own fully and can use. A government servant’s GP fund and a company’s provident fund are built from deductions from salary that you cannot touch until retirement or until a set event, plus the employer’s contribution and any profit credited. The question is whether that balance is already yours.
The view most widely quoted in Pakistan comes from Mufti Muhammad Shafi, the Grand Mufti of Pakistan, in his treatise on the provident fund. He held that the compulsorily deducted salary is not yet in the employee’s ownership and possession; it is a sum the employer owes, which becomes the employee’s when it is paid. On this view:
- No zakat while it sits in the fund, including the employer’s share and the amount credited to it.
- No zakat for past years when you finally receive it.
- Once received, it is ordinary money. If you already have a zakat date, in the Hanafi madhab it joins your savings and is counted on that date; if not, your zakat year starts from when your wealth reaches the nisab.
Many Deobandi muftis and darul-iftas in Pakistan give this answer. Scholars elsewhere, and some contemporary scholars in Pakistan, reason differently, as explained below.
What about voluntary contributions?
Many employees choose to put in more than the compulsory rate, or join a fund that is optional. Here scholars differ:
- Many Hanafi muftis say that money you choose to put in is like money you hand to an agent: it remains your wealth, so zakat is due on the voluntary part every year, along with your other savings.
- Some treat the whole fund the same way once it is governed by the same rules and cannot be withdrawn.
- If the fund lets you withdraw your balance whenever you wish, many scholars, Hanafi and others, say it is effectively in your control and is zakatable each year.
Mufti Muhammad Shafi’s treatise also discusses the extra amount the fund credits on balances, and whether taking it is permissible, especially on the voluntary part. That is a halal-and-haram question separate from zakat; ask your scholar about it.
Pension, EOBI, gratuity and commutation
A pension, EOBI old-age benefit, gratuity or commutation you have not yet received is not in your ownership. There is no zakat on it, and none for past years. Once the money reaches you, it is counted with your other savings on your zakat date. Monthly pension that you spend carries no zakat, in the same way as a salary; see zakat on salary. Living in the UK, the US or Canada? Workplace pensions, SIPPs, 401(k)s and ISAs are covered in zakat on pensions, 401(k), IRA and ISA.
Worked example: a retired officer
Tariq Sahib retired from a government department and follows the Hanafi madhab. His GP fund was made up only of compulsory deductions. Two months before his zakat date he received:
| Item | Amount | Zakat now? |
|---|---|---|
| GP fund final payment | Rs 35,00,000 | Yes, joined to his savings |
| Commutation of pension | Rs 20,00,000 | Yes, joined to his savings |
| Earlier savings in the bank | Rs 5,00,000 | Yes |
| Zakat for the past 30 years of GP fund | – | None, in Mufti Muhammad Shafi’s view |
He has had savings above the nisab for years, so his zakat date stays the same. On that date he has Rs 35,00,000 + Rs 20,00,000 + Rs 5,00,000 = Rs 60,00,000, if none of it has been spent. Zakat is 2.5% = Rs 1,50,000. Had he put Rs 5,000 a month into the fund voluntarily, his scholar might have told him zakat was due on that part every year, and he would need to work out those past years; see missed zakat for past years.
If he puts the money in National Savings certificates, it stays zakatable; see zakat on savings certificates.
What does each madhab say about provident fund?
Provident funds are modern, so these are contemporary applications of each school’s rules on wealth that is owed to you but not yet in your hands.
- Hanafi: many Pakistani and Indian Hanafi muftis, following Mufti Muhammad Shafi, say no zakat on compulsory deductions, the employer’s share or profit until received, and none for past years. Many of them say zakat is due yearly on voluntary contributions. A fund you can freely withdraw is treated as your wealth by many.
- Shafi’i: classical Shafi’i rules count a debt owed by a solvent party that you can claim, and require zakat for past years when a delayed sum is received. Contemporary Shafi’i scholars differ on whether a locked retirement fund is such a debt; many treat money you have no right to withdraw as not zakatable until received. Ask a Shafi’i scholar.
- Maliki: for money owed to you that you could not use, the Maliki school pays zakat for one year only when it is received. Contemporary Maliki scholars may apply this to a retirement fund; confirm with a scholar.
- Hanbali: like the Shafi’i school, classical Hanbali rules count a recoverable debt and pay past years on receipt. Contemporary Hanbali and Saudi scholars differ on locked retirement funds, and some say no zakat is due until the money can be withdrawn.
- Ahl-e-Hadith: we have not found a Pakistani Ahl-e-Hadith fatwa that settles this clearly. Ask your scholar; the Ahl-e-Hadith calculator will count whatever you enter.
- Shia (Ayatollah Sistani): no zakat on money, so no zakat on a provident fund. Khums applies to income; ask your marja’s office how and when khums applies to fund payments and pension, and use the khums calculator.
Is zakat deducted from GP fund or provident fund?
Pakistan’s Zakat and Ushr Ordinance 1980 provides for zakat to be deducted at source from a range of savings and investments, and people who file a CZ-50 declaration are exempt from those deductions. Whether anything is deducted from your own GP fund or provident fund depends on the fund and has changed over time, so check your fund statement. Anything actually deducted counts as zakat paid; enter it under Already paid in the calculator. See bank zakat deduction in Pakistan for how CZ-50 works.
This page explains well-known views to help you calculate; it is not a fatwa. Because scholars differ on this topic, ask a qualified scholar you trust about your fund.
Frequently asked questions
Is zakat due on GP fund every year?
On the compulsory part, many Hanafi muftis in Pakistan, following Mufti Muhammad Shafi, say no: zakat is due only after you receive it, and not for past years. Other scholars differ, especially on voluntary contributions.
GP fund par zakat hai?
Bahut se Hanafi mufti sahiban (Mufti Muhammad Shafi ki raye ke mutabiq) kehte hain ke lazmi katoti wale GP fund par wusooli se pehle zakat nahi, aur milne par guzre saalon ki zakat bhi nahi. Milne ke baad yeh baqi bachat mein shamil ho kar zakat ki tareekh par gina jayega.
Provident fund ki zakat kab deni hai?
Jab fund ki raqam aap ko mil jaye aur aap ki zakat ki tareekh par aap ke paas ho, tab baqi bachat ke saath 2.5%. Apni marzi se kataye gaye hisse par bahut se ulama har saal zakat batate hain, is liye apne aalim se poochein.
Is zakat due on pension, EOBI or gratuity not yet received?
No. Money you have not received is not yet yours. Once it is paid to you, it is counted with your savings on your zakat date.
Is zakat due on my voluntary provident fund contributions?
Many Hanafi muftis say yes, every year, because you chose to put that money in and it remains yours. Some scholars treat it like the compulsory part. Ask your scholar.