The payment of Zakaatul-Fitr in money
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Question: Is it permissible to discharge the obligation of Zakaatul-Fitr on the first day of Ramadhaan? And is it permissible to distribute it in money?
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Response: As for the discharging of it on the first day of Ramadhaan - there is Ikhtilaaf (difference of opinion among the scholars) about it. The most correct opinion is that it's not permissible, because it is called Zakaatul-Fitr, and al-Fitr (ending of the fast) does not occur except at the end of the month. Also, the Messenger of Allaah [sal-Allaahu `alayhe wa sallam] ordered that it be discharged before the people go out to the Prayer (Salaatul-`Eed). Along with that, the companions (Sahaabah) used to give out the Zakaatul-Fitr one or two days before the `Eed. As for discharging the Zakaatul-Fitr in MONEY, this is a point of Ikhtilaf (difference among the scholars). And the correct opinion - as I see it - is that it is not discharged except by (distribution of) FOOD. This is because Ibn 'Umar [radhi-yallaahu 'anhumaa] said: "The Messenger of Allaah [sal-Allaahu `alayhe wa sallam] made obligatory (the payment of) Zakaatul-Fitr from a Saa' of dates or a Saa' of barley..." (Bukhaaree 2:579), (One Saa' is equal to four (4) Mudd, and one (1) Mudd is equal to the amount held by cupping the two hands together. It is a measure by volume not by weight). Abu Sa'eed Al-Khudree [radhi-yallaahu 'anhu] said: "We used to distribute it (Zakaatul-Fitr) in the time of the Messenger of Allaah [sal-Allaahu `alayhe wa sallam] as one saa' of food, and our food was dates and barley and raisins and cottage cheese..."( Bukhaaree 2:582). So, it becomes clear from these two hadeeth that it (Zakaatul-Fitr) is not discharged except from FOOD. And the distribution of it in food displays it openly and shows it, and all of the members of the family know about it. In this way, there is an exhibition or manifestation of this aspect of the religion. As for discharging it in money, this causes it to be concealed (unseen), and perhaps the person may favor himself, by discharging it in money, and thus reduce its amount. (As the amount would differ if we compare the value of one saa' of dates to one saa' of barley for example. Since a saa' of barley is about 7 riyals ($2.00), while a saa' of dates ranges -according to quality - from 25 riyals ($7.00) for a lesser quality to 42 riyals ($12.00) for a medium quality, to 175 riyals ($49.00) for the best quality per saa'.)Therefore, strictly following the Law (al-Qur'aan and Sunnah) is best and it is blessed. Someone might argue that the distribution of food doesn't benefit the poor. (But, we say) the poor person - if truly poor - must definitely benefit from the food.

Shaykh Ibn 'Uthaymeen
Fataawa Ramadhaan - Volume 2, Page 935, Fatwa No.921;
Fataawa ash-Shaykh Muhammad as-Saalih al-'Uthaymeen - Volume 1, Page 463