There are two views on zakat payment for the withdrawal of the Employees Provident Fund (KWSP), namely full ownership and incomplete ownership.
Every company is required to contribute payments into the KWSP account of employees according to a certain percentage of their salary.
This KWSP money is usually used when someone has retired in old age and wants to use it to sustain their life.
If someone has never withdrawn money from their KWSP account, it is likely they will have a six-figure amount.
The Ruling on Zakat for KWSP Money
Through a post on the X platform (formerly Twitter) by @acaijjawa, a man working as a zakat officer shared some recurring questions he received when dealing with zakat issues related to retired individuals.
These questions are based on several scenarios, as follows:
#1. A person has just retired and wants to withdraw KWSP funds amounting to RM100,000. Is zakat required?
Upon reaching the age of 55 or during the retirement period, around 58 to 60 years, account holders can withdraw their entire KWSP amount. This indirectly makes the KWSP funds fully owned and subject to zakat.
Therefore, it is obligatory for a person to pay zakat, known as Income Zakat, as it is now considered savings.
#2. An individual has previously deducted zakat from their monthly salary. Is zakat still required for KWSP withdrawals?
The individual is still required to pay zakat on the KWSP withdrawal because the money was set aside earlier during the income zakat calculation. In other words, the funds in KWSP have not been previously subjected to zakat.
#3. An individual is a government employee but does not have KWSP and receives a gratuity payment upon service termination. Is zakat required?
Any form of gratuity, compensation, gifts, or awards that can increase a person’s wealth during that year and exceeds the nisab (minimum threshold) is subject to zakat at a rate of 2.5%.
KWSP Zakat Fatwa
Quoting a source from Selangor Zakat, Section 47 of the Administration of Islamic Law (Selangor State) Enactment 2003 [En. 1/2003], the Fatwa Committee for Selangor, under the order of the Sultan, has issued a fatwa stated in the schedule and published in accordance with subsection 48(6) of that Enactment.
KWSP contributors are encouraged to pay zakat immediately after receiving or withdrawing their KWSP funds if it meets the nisab requirement without waiting for a full year (haul).
NOTE: Haul means the savings or wealth owned has reached a one-year period according to the Hijri calendar (354 days) or the Gregorian calendar (365 days).
NOTE: Nisab is the minimum threshold of wealth that determines whether zakat is due. Zakat is not required if the wealth does not reach the nisab.
For KWSP zakat calculation, click the following link for more information: https://tunaizakat.my/zakat-kwsp/
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