Question
If someone owes me money, can I forgive him to make it my zakat payment?
Answer
By forgiving a debt that is owed to you, your Zakaat will not be discharged for the wealth which is in your possession. However, if you give your Zakaat to the person who owes you money, and he is a deserving recipient of Zakaat, and after you ask for the money back to fulfill the repayment of the debt, this will be permissible. In this way, both your Zakaat will be discharged and your debt will be paid.
Checked and Approved By:
Mufti Muhammed Saeed Motara Saheb D.B.
References
واعلم أن أداء الدين عن الدين والعين عن العين ، وعن الدين يجوز وأداء الدين عن العين ، وعن دين سيقبض لا يجوز و حيلة الجواز أن يعطي مديونه الفقير زكاته ثم يأخذها عن دينه
(رد المختار سعيد ج٢ ص٢٧٠)
وان كان المديون فقيرا فوهب الدين ينوي به زكاة مال عين عند الواهب لا يسقط عنه زكاة ذلك المال
(فتاوي قاضي خان حافظ كتب خانه ج! ص١٢٦)