Zakat Exemptions under Pakistani Law: An Analysis of Case Law
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Zakat is a religious fiscal obligation for Sahib-e-Nisab Muslims, holding a central space in the Islamic economic system. Its principles are described by the religion which are specific. This article discusses the jurisdiction of the Federal Shariat Court on the law of zakat. It also examines the judicial decisions of superior courts of Pakistan on the matter of exemptions in zakat (religious fiscal obligation) deduction. According to judicial interpretations of zakat laws, all those institutions that are owned by the government or in which the provincial or federal government holds majority shares are exempted from the definition of Sahib-e-Nisab. NIT Units and KDCs are exempted from tax due to payment of zakat at source, but any asset that is made and derived from them is not exempted. Zakat exemptions are available for charitable trusts and public bodies. This article concludes that tax concession will be granted for assets on which zakat is compulsorily deducted under the Zakat Ordinance in the same year of deduction. The main purpose of this concession is to avoid the burden of double taxation on the payee. However, it is recommended that exemptions based on fiqh and faith should not be permitted. Therefore, there is a need to amend the zakat system to make it consistent with the Islamic zakat system and to discontinue the compulsory deduction of zakat at source.
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References
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