Is Tax-Free Savings Account (TFSA) halal?

Bismillahi Ta’ala

Walaikum Assalam Warahmatullah,

A Tax-Free Savings Account (TFSA) is just a type of account where your investment growth is tax-free. But simply depositing money into a TFSA doesn’t mean it starts growing automatically through investments.

When you open a TFSA, your contributions will typically just sit as cash in the account until you decide what to do with them. For example, within a TFSA, you can choose to invest in things like:

• High-interest savings (just earning small interest)
• GICs (Guaranteed Investment Certificates)
• Stocks
• Bonds
• Mutual funds
• ETFs (Exchange-Traded Funds)

Unless you actively purchase these investment products inside your TFSA, your money will not generate returns beyond whatever minimal interest the cash portion earns (if any).

This means TFSA acts as a regular checking account with the benefit of being tax-free for its duration.

For shar’i point of view,

• If you merely keep money in the TFSA as deposit, it will be zakatable asset.
• If you have redirected those funds towards halal-suitable investments, then you will apply the process of calculating zakat on business or stocks previously provided, or explained in our Zakat Workshop.

Wallahu A’lam

And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi