Giving earned interest to charities and others : deducting interest from taxes

Fatawa Question

Assalamu Alaikum, In Canada, the interest paid on loan for investment is considered tax deductible. I understand that "Riba" is forbidden. However in this case it seems that the individual taking loan for investment or business would pay interest on the loan for the year till he / she files for tax return and consequently that interest is refunded. Is that acceptable for a Muslim living in North America ? My other question is what are the alternatives for Muslims in Canada ? The tax we pay on salary is around 40 % Retirement registered savings plan (RRSP) offers tax shelter but then the full amount is taxed at withdrawal when retiring. The forms of investment in RRSP are GIC (which is sort of a savings account that gives fixed interest. This is deemed of course "Haram". So any interest gain, I give out for "Sadaqah". The other form is mutual funds. Taking into consideration that I estimate an amount of money and give out "Sadaqah or Zakah" to purify that money from any "Riba" dealings that the bank surely deals with. I tried to put funds in mutual funds that are pure equity. That product just doesn't exist at the bank. There is always a percentage of bonds, or bank based investment. Knowing that equity market is crashing right now. What are the options ? Here is the list of "Haram" Interest on saving Dividends Any sort of fixed income Bonds Trusts Other options that I think are Halal : Real estate (Even with prices falling down, it's way beyond reach to an average person to purchase a home in cash) Mutual funds assuming they're not dealing in any forbidden activity. Due to high market volatility it's not recommended. So what does an average Muslim do other than putting savings on the side without any investment and loosing value as years go by plus being taxed at 40 % ? In short, it seems that due to the global existing financial system, all sorts of income generating or investment is "Haram", what are the options of "Halal" out there ? Jazak Allah Kul Kheir, Olfat

Fatwa

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Publication Date

2009-02-21

Main Subjects

Economics & Business Administration
Financial and Accounting Sciences
Islamic Studies

Topics

• Banks
• Islamic jurisprudence
• Taxes
• Interest
• Bank loans
• Usury
• Discount

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-729896

• APA
• MLA
• AMA