One of the most common dilemma faced by practicing Muslims in India is that if there are any sharia compliant tax savings options in India.
The short answer to it is NO, as there is no option that can be considered 100% compliant. But there are some divergent views with respect to tax saving instruments.
There are 3 main types of instruments for tax saving purposes – Debt based, equity based and insurance based. Unfortunately, all these options are not shariah compliant.
Amongst these equity based option like ELSS mutual funds are majorly equity based, but even that cannot be considered fully sharia compliant as the neither the investor have an option to choose the shariah compliant equities nor the fund has the intention to invest in shariah compliant instruments and therefore generally they invest in banks and other such companies.
It is for these reasons that it is very difficult for a practical Muslim to find shariah compliant options for tax savings purpose.
Some scholars of the view that the investments made in PPF can be considered as acceptable, since the money deposited is your own money and the additional provided by the government as well is earned.
The relevant fatwa in this regards have been shared as below.
https://darulifta-deoband.com/home/en/halal-haram/64211
https://darulifta-deoband.com/home/en/halal-haram/21143
https://darulifta-deoband.com/home/en/shares-investments/66062
Given these limitations, the best would be to choose the option that has been permitted to the maximum and regularly invest in permissible investment options like equity or gold/silver to make up for the tax paid.
There is another silver lining that has been witnessed in the latest budget wherein the government has changed the slab for the New Income Tax Regime and provided option to salaried class. This option may be utilized to save taxes as other tax saving options are not halal for us. With this step it seems that the government wants to drive the economy towards consumption rather than savings based economy and due to which the tax savings from these other instruments will gradually decrease.
Also, as a community in general we should strive and request the government to introduce sharia compliant options.
The world over the need for sharia compliant investment options has been identified , unfortunately in our country despite the large Muslim population such options are still not available.
A part of the blame is to be shared by the community. Muslims largely are either ignorant or do not care about it. So the need of the hour is to educate ourselves about these aspects and once we are aware only then we can demand options as per our requirements.
May Allah guide us to the right path.
