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Fatwa Answer

Question ID: 1594 Category: Zakah
Zakat on 401K

What is the ruling for Zakat on 401K if we cannot withdarw any amonut from it at this time.

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الجواب وباللہ التوفیق

Under the 401K plan, the company under its policy, deducts a percentage from the monthly salary of the employee. The company also adds a certain percentage of money into employee’s 401K account on monthly basis.

After retirement, the employee receives not only his deposited money but an additional sum of money that was added by the employer. That additional amount is considered a bonus and a gift from the employer. Hence it  is not required to pay Zakat on that share of money. 

However, if you invested in it voluntarily per your own choice, Zakat will become obligatory on the entire deposited money if that money is equal to the “Nisab” of Zakat. But if the amount is less than “Nisab” at the time, but your other property is satisfying the zakat requirement, then combine the saved money with this property and calculate zakat of the total value, even though you are not able to withdraw money from this account for a length of time.

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