Q: Do we have to pay zakah on a registered educational plan or RRSP?
A: Yes, zakah is due if the amount reaches the nisab (around $11,000 CAD) and has been held for a full year, as long as you have access to it.
Q: What if I don’t have full access to the RRSP?
A: RRSPs generally cannot be fully accessed until a certain age, and early access usually involves penalties and taxes.
Q: Hypothetically, if I have $50,000 in RRSP, do I pay zakah on the entire amount?
A: No, you do not.
Q: Why not on the full $50,000?
A: If you withdraw the money now, you would not receive the full $50,000 due to penalties and taxes. You might receive around $41,000 or $42,000. The rest is not yours.
Q: So how do I calculate zakah on RRSPs?
A: Every Ramadan, calculate how much you have in your RRSP. Then, deduct the penalties and taxes based on your agreement. Whatever amount is left is what you pay zakah on.
Q: Is there zakah on RRSPs at all?
A: Yes, there is zakah on RRSPs.
Q: Is the zakah on the full amount?
A: No. Zakah is calculated only on what remains after subtracting penalties and taxes.
Q: Why do we deduct penalties and taxes?
A: Because these amounts are not part of your actual accessible wealth. If you withdraw early, they are deducted from your total.
Q: What exactly do I do each Ramadan?
A: You calculate how much you have in your RRSP, subtract the taxes and penalties imposed by the bank or the government, and then pay zakah on the remaining amount.
Q: Is there zakah on RRSP or educational plans?
A: Yes, both have zakah. Even if there are penalties or taxes on early withdrawal, you deduct those amounts and pay zakah on the remainder annually.