The addition to the provident fund is not interest

Question

Question: In the January 1963 issue of the monthly “Nizam” (“Order”), in the column “Bab al-Istifsar” (the queries section), I came across a request for a fatwa (istifta) concerning the provident fund, in which it is written that this surplus amount, which is received as the fund after leaving employment, does not fall under interest. Kindly clarify this issue a little.

Answer

The employee did not deposit this portion of the salary himself; rather, this arrangement was instituted by the government in view of its own law, and its purpose is the employee’s welfare. As long as the employee has not taken possession (qabd) of it, it is not his property; therefore whatever addition is received on it will not be interest either.

Source: Fatawa Mahmudiyya

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