Is it permissible to deduct the debt of a poor from zakat?

Al-Shafi’i, in one of his opinions, the As-hab from the Maliki school, Ibn Hazm from the Zahiri school, and Al-Hasan Al-Basri and ‘Ata all maintained the permissibility of this. This is because just as it would be permissible to give an indebted person zakat, it is permissible to take it back from him to cover a debt. According to the opinion of the majority of scholars and one position in the Maliki school, it is permissible if a creditor pays his zakat to his debtor and the debtor returns it to him [in settlement of his debt], or if the debtor borrows money to pay his debt and the creditor returns to him the money from his zakat. However, this is only permissible when it does not involve any attempt to evade the payment of zakat. But if it does, it is impermissible according to Maliki and Hanbali scholars but permissible according to the Shafi’is provided it is not based on a condition and an agreement.

Ibn Hazm Al-Zahiri said: “If a creditor who is owed money in the form of wheat, barley, gold, silver, or cattle by a deserving recipient of zakat pays him from the kind of property itself, intending it to be from his zakat, then it is counted as such. Similarly if he were to give the debt to one who deserved it and transferred it to the person who owes him money and intended it to be zakat it would likewise count as such. The evidence for this is that he is commanded to give the mandatory zakat, and to give charity from his mandatory zakat to those who are deserving (ahl al-sadaqat) in accordance with what he owes. So if forgiving a debt would be considered charity (sadaqah) then it counts [as zakat]. According to Abi Sa’id al-Khudri there was a man during the time of the Prophet who was afflicted in fruits (thimar) that he had purchased so that his debts were great. The Messenger of God said, ‘Give him charity.’ And this is the position of ‘Ata ibn Abi Rabah and others.”

Based on this we see nothing to prevent counting the forgiving of a debt as zakat, although it is better to yandhurahu in order to extricate oneself from the difference of opinion, or to forgive the debt out of a sense of charity other than zakat, or to give him the money and then take it from him, even if it is the same money, in order to prevent the trick that some people commit especially when it comes to transactions between businessmen. And God is Most High and Knows Best.