Q:Are Muslims allowed to take interest money from the bank and use it to pay their own taxes or insurance premiums?
الجواب حامدًا و مصليًا و منه الصدق و الصواب
A: When needed, one should seek to open an account with an Islamic bank or the Islamic window of a conventional bank or a non-interest bearing account with a conventional bank.
If one only has access to an interest bearing account which then earns interest such interest is actually the property of others and must be returned to them. If the rightful proprietors cannot be identified or there is no mechanism to return their money to them, then to absolve oneself, one should distribute the interest amongst the poor or to public welfare projects without any intention of reward.
One cannot use that interest to one’s benefit. Thus, one cannot use that interest to pay one’s taxes or towards insurance premiums. However, if the bank is state owned and the level of tax is also oppressive, then one may pay such tax by transferring the interest to the Inland Revenue as one is merely returning the monies received from the state back to the state. If the bank is owned by private shareholders then this cannot be achieved.
And Allah knows best.
Mufti Mohammed Zubair Butt
Chair Al-Qalam Sharia Scholars Panel