Q: A person who is already eligible for giving zakat, if he is a government servant and he takes loan for house building from government and has to pay installments from his monthly pay for this loan. Is zakat wajib on this house building loan?
A: Zakaat is not waajib on the loan he has taken. He should calculate the amount of zakaatable assets he owns i.e. cash, gold and silver jewellery and stock in trade. Thereafter, he should deduct his debts and liabilities (including the government loan he has taken) from his zakaatable assets and thereafter work out 2.5 percent of the remainder (i.e. if the remainder reaches the amount of nisaab or more). This will be the amount that he will have to give out in zakaat. If after deducting his debts and liabilities he possess less than the nisaab or he does not possess any wealth, then zakaat is not compulsory upon him.
For further details regarding the details of which wealth one has to pay zakaat upon, refer to http://muftionline.co.za/node/29
And Allah Ta'ala (الله تعالى) knows best.
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