Zakat on Series I Savings Bonds: Principal, Interest and Purification

If you hold U.S. Series I savings bonds, zakat is due on the principal, the amount you paid for the bonds, according to Britain’s National Zakat Foundation (NZF). The interest the bonds earn is treated as riba (interest), which major Islamic standard setters prohibit, so NZF says it should be given away to charity rather than kept or counted as your wealth.

Reviewed by Hafiz Maqsood Ahmed.

I bonds became popular with savers when inflation surged. Bonds issued from May 1 through Oct. 31, 2026, earn a composite rate of 4.26 percent, including a fixed rate of 0.90 percent, according to TreasuryDirect, and each Social Security number can buy up to $10,000 in electronic I bonds per calendar year. The Treasury sets new rates every May 1 and Nov. 1. The positions below are those of named bodies; The Halal Times does not issue rulings.

Are I bonds permissible?

I bonds pay interest on a loan to the U.S. government. The International Islamic Fiqh Academy and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) both prohibit buying interest-bearing bonds, including government bonds, as explained in our analysis of whether bonds are halal. Many Muslims bought I bonds before learning this, or received them as gifts, so the practical question is what to do with bonds already held.

Zakat on the principal

NZF’s guidance on zakat on bonds says “Zakat is payable on the principal amount of the bond (cost of the bond)” and “the entire amount of interest should be donated for charitable purposes.” The principal is the holder’s own money, owed back by the government, so it counts with savings on the zakat date.

What to do with the interest

Because the interest is not considered the holder’s lawful wealth, it is neither kept nor counted for zakat. It is given away, a practice often called purification, separately from any zakat paid. Holders who cash the bonds can donate the interest portion when it is paid out.

How to calculate

1. Find the purchase price of each I bond you hold. TreasuryDirect accounts show the original amount.
2. Add the total principal to your other zakatable wealth on your zakat date.
3. If the total exceeds the nisab, pay 2.5 percent.
4. Separately, donate the interest the bonds have earned, ideally when you redeem them.

Example: You bought $10,000 of I bonds in 2024, and they are now worth $10,950. Zakat on the principal is $250 (2.5 percent of $10,000). The $950 of interest is donated to charity and is not counted as zakat.

Early redemption

TreasuryDirect says that bonds cashed before five years lose the last three months of interest. Because the interest is not counted anyway, the penalty does not change the zakat on the principal, though it reduces the amount available to donate.

Alternatives

Savers who want a government-backed, inflation-aware investment without interest can look at sovereign sukuk, which pay returns from assets such as leased buildings. Our explainer on how sukuk work describes the main structures.

The wider rules on what counts as zakatable wealth are in our guide to zakat.