Counting a loan towards zakat

Question

Zayd lent ‘Amr two hundred rupees. Now Zayd wishes to forgive the loan, but in this way: Zayd owes two hundred rupees of zakat, so each year 25 rupees of the loan would be removed from ‘Amr’s liability, and those same 25 rupees would count as payment of zakat. Is this valid?

Answer

In this case the zakat will not be discharged. Rather, he should give him the two hundred rupees at once or in several instalments and then recover them from him towards his loan; in this way the zakat will be discharged and the loan will also be recovered.

Source: Fatawa Mahmudiyya

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