Q: Which debts can be deducted from my Zakat calculation?

A: Certain debts can be deducted from one’s value of assets in a Zakat calculation.

Deductible debts:

1) Debts payable in full within 12 months

Incurred expenses to be settled in full within 12 lunar months can be deducted from one’s Zakat calculation.

2) 12 months’ instalments of long term liabilities

If the debt is scheduled to be repaid over a number of years, on the Zakat anniversary, one may deduct one year’s worth of instalment repayments.

3) Arrears

All arrears and overdue payments can be deducted from one’s Zakat calculation.

4) Personal loans from relatives and friends

The amount you intend to repay in the next 12 months.

5) 12 months of Bank loans

The capital repayment due for the forthcoming lunar year from a long-term bank loan can be deducted. Any interest element is prohibited and cannot be deducted.

With regards to debt deductions, there is permissibility cited by scholars to deduct one year's worth of repayments. However, this deduction should only be made if paying Zakat will impact your ability to repay the debt. If the Zakat payment does not impact your ability to repay your debt, we encourage that the deduction is not made or at most, deduct one month's debt payables. The reason for this is that the philosophy of deducting debts was based on Zakat payments affecting your ability to repay the debt and in turn, put you in harms way. When a person is not in harms way at all by paying Zakat despite having debt, then the debt ought not to be deducted.

And Allah knows best!

Mufti Faraz Adam