Alhamdullilah, i am in a position to give zakat every year and i have done so in the past. i try to spread out giving my zakat to several organisations and people whom i trust will distribute it on my behalf. I know it is by the grace of Allah that i am able to have more than enough and i am grateful to Allah swt for His bounties. One of the organisations that i gave zakat to has a DGR status which means that they could issue me with a tax deductible receipt which i could use in my tax returns. My question is:
Is it alright for me to use it in order to reduce my overall taxable income after all if i do not do so, this would mean i would be taxed by the Government instead. Claiming it does not mean i actually get reimbursement of the zakat that i have given away to this organisation, rather it would help reduce the tax i have to pay to the government, which is at a much more higher rate than 2.5% (more than 10 times higher).
I know my country of origin allows us to include that in our income tax returns because the zakat given to our Islamic council or other appropriate islamic organisations are used to help the muslim community itself according to the different asnafs. The government realises that we are also actually performing the same role as them in taking care of the welfare of the needy.
We are heavily taxed here, definitely higher than my country of origin. So can i use the tax deductible receipts for my zakat to reduce my taxable income? I do also give to friends and relatives part of my zakat which of course are not tax deductible.
May Allah swt guide you to answer my query. Jazakallah khair.
In the Name of Allah, the Most Gracious, the Most Merciful.
Yes, it will be permissible to use tax deductible receipts for zakat in order to reduce one’s taxable income.
And Allah knows best.
Mufti Faizal Riza
Darul Ifta Australia