Is it permissible to pay the Zakat on money saved in an Islamic bank in advance during the year, for example, when profits are received, and is Zakat obligatory only on the principal, or does it include the profits as well?

First: It is not permissible to invest money in interest-based banks. The bank must be truly Islamic and not deal in usury.

Second: It is permissible to pay Zakat in advance before it becomes due, according to the majority of scholars. However, it is preferable not to pay it in advance unless there is a need or a benefit, such as a famine or Jihad. Scholars have stipulated that advance payment is permissible for one or two years only.

Third: Zakat is obligatory on both the principal capital and its profits together if a Hawl (one lunar year) has passed on the principal capital and it has reached the Nisab (minimum threshold). The Hawl is completed with the passing of one Hijri year. If the Islamic bank is trustworthy and disburses the Zakat of its clients' money, then that suffices for them.