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Articles

Category 2

Purging

1. METHODOLOGY OF PURGING INTEREST INCOME

Mufti Abdul Kadir Barkatullah
S. M. Wasiullah

The process of removing interest income from total income is known as interest purification or purging. It is one of the important requirements of the Sharīʿah when undertaking Islamic investments. Purification can be either of interest income only or of different kinds of impure income. Interest income is accrued on bank deposits, loans advanced or interest-based investments. It is reported as ‘Interest Income’ in financial statements of companies. Generally, interest income is reported as a part of Total Income. The company benefits from the accrued interest income by utilising it for meeting its costs or expenses from various operations or for paying dividends and creating reserves.