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Fatwa CenterDealing in Ribaa to avoid taxes
Question
I am working in India, we were strictly avoiding interest payment or receipt, but some parameters made us rethink which are as follows - I am paying approximately 25% of salary as income tax, being a joined family there is no saving. Government gives concession in income tax on savings and specially for home lone - principle amount as well as interest payment is exempted from Tax - the question - (1) Is it advisable to take loan with interest for purchasing a house with intention to reduce the tax burden? (2) Can we save money for avoid tax payment and earn interest - this interest can be used for payment of taxes or for collage donations? (3) There are certain schemes in which investments will get certain benefits not interest which is not fixed and is based on stock market will this be Halaal, however in this schemes also some part is coming from interest (5-10%)? (4) Is trading of shares Halaal?
Will be thankful for giving guidance on achieving saving with going in Haraam transaction.
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.
We have already issued Fatwa 89947 clarifying the ruling on taxes, so please refer to it. It is also not permissible to borrow money with interest even with the intention of reducing taxes except in case of a necessity.
Buying a house is not a necessity as long as it is possible to rent. It is also not permissible to save money in a bank which deals with Ribaa (interest or usury); having the intention of reducing or avoiding taxes is not a sound excuse.
You have to know, furthermore, that if taxes are unjustly imposed on a person, it is not permissible for him to avoid them by committing what is forbidden; rather he may avoid paying these taxes or use any permissible trick in doing so.
It is permissible to invest money in company shares whose transactions are according to Islamic Law, and which does not deal in what is forbidden, or in Ribaa either in lending or borrowing money, and does not save its money in banks which deal with Ribaa. However, it is not permissible to invest in other types of companies beside what is detailed above. For more details, please refer to 82105.
Allaah Knows best.
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