In Malawi most people pay by cheque to Islamic institution.
The question is if I pay institution ABC 5,000,000.00 kwacha
The institution has received 5,000,000.00
But I am get a 30 percent tax relief on this 5,000,000.00 from the tax people because they allow this as an expense and thus not taxable.
So 30 percent of 5,000,000.00 is 1,500,000.00, I am getting relief from tax people.
So have I paid 5,000,000.00 or have I paid 3,500,000.
Please guide on this.
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The question is not very clear.
At your Islamic Zakat date, you will calculate the Zakat due on your wealth i.e. 2.5% of your net Zakatable assets (Assets minus liabilities). The amount you will pay will be regarded as discharged even though you may get a tax relief of 30% on your donation to a registered Islamic organization at the end of your financial year/period because of it being treated as an expense. Tax to be paid/due at your Zakat date will be regarded as a liability.
[In the above example, the 5 million given as Zakat will be considered discharged. The donor benefit is that the 5 million is treated as an expense and hence not part of his taxable income. The registered Islamic organization is also not taxed on the donated amount.]
And Allah Ta’āla Knows Best
[Mufti] Safwaan Ibn Ml Ahmed Ibn Ibrahim
Checked and Approved by,
Mufti Ebrahim Desai.