Giving Zakaat with the amount of fixed deposit and/or LIC amount
Can Zakaat be given from the money of fixed deposit or through insurance? On this matter, one section of scholars holds the opinion that India is Dar Ul Aman i.e. a place of peace. Thus, the dealings with increase/decrease in money come under usury (Sud in Urdu) and the amount got through fixed deposit is forbidden.
Another section of scholars holds the opinion that India is a non‑Islamic country and the said dealings don’t come under usury.
It should be noted that this ruling varies with the country. As India and other such countries are non-Islamic country and the Jurists have clarified that in non-Islamic countries, a Foul Sale (Ba’yah Fasida) is permissible and any transaction with increase/decrease of money without any cheating of any kind doesn’t come under usury as such, thus accepting amount of fixed deposit, insurance, etc. is permissible. As mentioned in Al Hidayah, Vol. 3, Pg. No. 86.
When there is a difference of opinion among the scholars about this, then there is a doubt in the money got through fixed deposit. Zakaat should be given from the money in which there is No. doubt of any kind. Thus, Zakaat should not be given from the money got from fixed deposit.
However, in an Islamic country, as the dealings with increase/decrease of amount in them fall under usury, fixed deposit is not allowed. The gain achieved through fixed deposit is usury, which is unequivocally forbidden in the Shariah. The person who gives/takes this money is a sinner in the light of the Shariah and Zakaat cannot be given with this money.