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Ruling 1803

If a person does not make a profit at the end of a year and borrows money in order to meet his living expenses, he cannot deduct the borrowed amount from the profit made by him in succeeding years and thereby not pay khums on the profit. However, if he borrows money during the year in order to meet his living expenses and he makes a profit before the year’s end, he can deduct the borrowed amount from his profit. Similarly, in the first case, he can repay the borrowed amount from gains made during the year and that amount is not liable for khums.

  • Publisher's Note

    This ruling has been updated. His Eminence al-Sayyid Ali al-Husayni al-Sistani now allows the remaining outstanding balance of a loan for something that is a deductible expense to be deducted from the surplus income of future years until the time the person’s cumulative surplus income reaches the amount of the outstanding loan balance. For further information about this new ruling and its application, see Khums: A Brief Guide, pages 7 to 11.