Fatwa ID: 05248

Answered by: Mufti Eunus Ali 

Question

Assalamu Alaikum. I am working in a company where they are deducting 12% of my salary as PF. And I have an option to make this 12% to 24 or 36 i..e VPF. Is this allowed in Islamic Shariah? And it is also useful for income tax saving purposes. At retirement, they will give some extra amount with my actual saving. Please sort out this problem I am totally confused than you.

In the name of Allah, the Most Gracious, the Most Merciful

Answer

Allah states in the Quran, “Allah has permitted transactions and has forbidden riba (interest)” (Surah Al Baqarah v.275)

It is narrated by Abdullah Ibn Mas’ud (may Allah be pleased with him): The Messenger of Allah (ﷺ) cursed the one who accepted usury, the one who paid it, the witness to it, and the one who recorded it. (Sunan Abi Dawood: 3333)

It is evident from the above-mentioned verse and hadith that involvement in riba (interest) is haram and must be avoided at all cost.

In regards to your question, as the Voluntary Provident Fund (VPF) scheme attracts interest in the payout to those who sign up for it, it will not be permissible due to the above verse and Hadith.

As it is a voluntary contribution it will need to be avoided.

Only Allah knows best

Written by Mufti Eunus Ali

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham