I wanted your opinion as i want to be 100% sure about this matter.
I try to avoid earning interest, but due to the risk of scams with idle money in a bank account, I have placed some of my funds in a fixed deposit, intending not to use the interest earned.
Even though I don’t use the interest money, the government still deducts taxes on the interest earned from these FDs.
Additionally, taxes are deducted directly from my salary every month. At the end of the fiscal year, I have to pay any additional tax due to the government.
Several people, including my Molvi Sahab and others, have told me that it is permissible to use interest money to pay taxes since the government imposes excessive taxes without providing sufficient benefits in return.
Here is my dilemma:
Can I consider the interest earned as permissible for personal use, knowing that the total interest amount will always be less than the taxes I pay each year?
For example, if the interest earned is ₹5,000 and I pay ₹10,000 in taxes every month from my salary, can I use the ₹5,000 for my personal needs, thinking that I have paid 10k as tax for that month?
Bismillahi Ta’ala
Walaikum Assalam Warahmatullah
1.
Engaging in an interest-based transaction:
At the outset, engaging in any contractual obligation which has haram elements in it is itself haram and sinful. This is regardless of one’s “intent” to not take any haram proceeds.
So when you say that you have invested in “Fixed Deposit”, then the transaction in its entirety is haram and sinful, and not only the proceeds therefrom.
The justification of risks does not change this ruling.
Paying Taxes with interest monies:
You have misunderstood the mas’alah here. As mentioned above, entering in an interest-based transaction is haram and impermissible. The interest monies from such transaction will be haram and one may not enter such transaction.
However, fuqaha’ have mentioned that, should one acquire interest monies from some avenue, without engaging or intentionally entering into such haram transactions, then such monies must be disposed without beseeching benefit from it. This haram money in one’s possession is shar’an rightfully to be returned into the avenue it has been taken from.
So if this money comes from some bank account one has, then it should primarily be given back to the same bank avenue. The mas’ala dictates that in such a case, if it so happens that the same bank has also levied some interest on the client, then the interest monies may be used to reconcile those interest levied.
It is along these lines, if the interest monies are accrued through some government avenue, then only can those interest monies can be used to pay the taxes or fines levied by the government on the individual.
The rational for this allowance is two folds:
i. Taxes are an avenue to return the interest accrued unwillingly, which needs to be disposed.
ii. and what you have mentioned as “since the government imposes excessive taxes without providing sufficient benefits in return”, and thus using these means to repel such unfair oppression will be permissible.
The same may not be used for interest received from non-governmental avenues, or one that is willingly acquired by entering an interest based transaction.
2.
In line of above, it is also not permissible to divert those interest monies acquired towards one’s personal expenses as well.
Lastly, what I have mentioned is based on general principles, but the issues of tax being an oppression or unfair changes according to the local origins. Since your question pertains to India, I suggest approaching Darul Iftaa from one of the prestigious educational seminaries in India to get their opinion and guideline.
Wallahu A’lam
And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi