Question:

Assalam o Alaikum, I want to take loan out of my 401K and pay it back to my lender as soon as i get, so my question do i have to pay zakat on the loan taken from the 401K?
Jazak-Allah khairuk

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

In principle, when one takes a loan from his 401K account, he is borrowing from himself.

Therefore, any money that one has in his ownership on his annual Zakah day is liable for Zakah, whether that money is physically with him as a result of taking the loan and he has not spent it yet, or that money is in his 401K account (either he never took a loan or returned the money back into his 401K account after taking a loan).

That money which one has already spent prior to his annual Zakah day and has not returned it back into his 401K account prior to the Zakah day, is not liable for Zakah.

For more details on Zakah and the annual Zakah day, please listen to the following lecture:

http://masjidyaseen.org/wp-content/uploads/2020/04/Fiqh-of-Zakah-and-Taraweeh.mp3

And Allah Ta’āla Knows Best

(Mufti) Abdul Azeem bin Abdur Rahman