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Is Penalty on Unused Advance Amount Riba?


Asalam alaikum My company offers many perks such as payment towards mobile handsets, laptop white goods and furniture that can be purchased at certain intervals of time. The procedure is to apply for an advance (a fixed amount) for any of the items, buy the item after the advance is transferred in your account and then submit the bill as a proof of your purchase. Recently I had applied for an advance for mobile handset, however on a later date the amount ceiling for the same was increased by 40%. Now if I want to avail the higher advance amount I have to refund my existing advance with some 18% penalty. **Is this penalty considered as riba and is it haram?** Please clarify my queries Jazakallah Khairan


Salaamun Alaikum

If you make an advance payment for an item and after some time regret your decision and therefore cancel that payment, and this action results in you having to pay an 18% penalty on the item, then this would not count as interest, and so there is nothing wrong with this.

Interest is mostly related to loans, and since this doesn’t come under taking a loan, it wouldn’t count as interest.

Miqdad .R.