Are Tax Saving Incentive Plans permissible?

Assalaamu Alaikum Mufti Sahib,

I’m in need of financial advice…in regards to those Tax Saving Incentive Plans (TSIP) whereby one can reclaim on one’s annual income tax, are there any halal ones available? If so, can you direct me to one?

Also, even if there’s no halal ones available, is it permissible to partake in a plan, not use the interest gained (…and perhaps just donate the equivalent to a needy organisation even though there’s no blessing associated with it) and make the claim for the yearly income tax?

I believe the government said for either $60K or $72K contribution per year in the TSIP, you can claim it back when you file your income tax.

The Bank or Insurance company you take it with will invest it and it’ll “grow”. I’m not sure whether this will be considered halal or not, that’s why if it’s not, if it’s okay to take out the plan but give away the profit or whatever gains that you get back on the total contribution and just be able to claim back on the income tax.

I think you can also claim back on an annuity plan…not sure if it’s one and the same, but the premise of the reclaiming was to encourage savings I believe.

Please advise what should be done in this matter جزاك الله

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

There isn’t any TSIP which is halaal here in Trinidad. With Respect to partaking in a plan even though you do not want to use the interest gained, will be questionable. The reason for this is that when you take part in a plan, your money is pooled together with monies of other contributors and invested or placed in a manner to receive interest. If the monies are invested in companies that deal with haram products, then your monies would have been invested in something which is haram. And if interest is generated, then it means that interest has been generated upon your money also.

Banks, most of the time, invest in higher-yielding fixed income investments like mortgage, securities, treasury bonds and notes etc. All of these bring about interest. Insurance companies also invest in various investments which include bonds and money market funds. These also bring about interest.

It is not permissible to invest your money in a plan or company which you know will invest your money in unlawful products or use your money to earn interest.

Claiming back an annuity plan means that you will have to take out an annuity plan. This plan is only issued by an insurance company which means that your monies paid to the insurance company would be used by the company to bring about returns and interest. Hence, it will not be permissible.

And Allah Knows Best.

Mufti Waseem Khan.

15/11/16.