Deduction of full house bank loan or what is due in the next 12 months for Zakat
Question
You have written the following in your answer: “Third, the default ḥanafī position is that both short-term/immediate and long-term/deferred debts are to be deducted when calculating Zakat or determining eligibility to receive Zakat. Therefore, loans from family and friends can be deducted in full because the repayment can be demanded at any time. However, those who have bank loans should only deduct what is due or what they intend to pay within the next 12 months.”
In another answer you have written: “The default ḥanafī position is that both short-term/immediate and long-term/deferred loans will be deducted when calculating Zakat. However, nowadays, many people have long term loans for commercial or investment purposes. Such people should only deduct the loans that are due within the next twelve months, unless they are actually poor. Similarly, those who have bank loans should only deduct the amount that is due within the next twelve months, unlike the scenario in question because the family members can demand the loan anytime.”
My question is that I can understand this for commercial and investment loans. However, if someone is a first-time house buyer, and he is working very hard in repaying his mortgage, and making repayments more than the minimum amounts and avoiding unnecessary expenditure such as going on holidays, is there any scope for deducting the full loan amount (excluding the interest)?
بسم الله الرحمن الرحیم
Answer
The default and relied position of the Ḥanafī school is as stated that both short term and long-term loans can be deducted when calculating Zakat. However, the proliferation of commercial and investment initiatives has resulted in many rich people spending prolonged periods of their lives in debt. This is why many of our jurists have stipulated that such people should only deduct what is due or what they intend to repay in the next twelve months.
The case of a first-time house buyer who is striving to repay his loan and avoiding unnecessary expenditure can be distinguished from investors and second home buyers based on the fact that a first house is a necessity and a need and he is considering it a burden and behaving accordingly by avoiding unnecessary expenditure. There is therefore flexibility in this scenario to deduct the full loan (excluding the interest where applicable) based on the default position of the Ḥanafī school, although it is preferred to only deduct what is due or what is intended to be repaid over the next twelve months.
Allah knows best
Yusuf Shabbir
12 Muḥarram 1445 / 30 July 2023
Approved by: Mufti Shabbir Ahmed