Question Summary:
What should a person do with interest money?

Question Detail:

What should a person do with interest money?

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
It is incumbent upon a person to dispose of the interest money as charity to the poor who are entitled to receive Zakaat (i.e. who do not have the nisaab of Zakaat) without the intention of receiving reward. This charity is meant only for disposing of an unclean and unlawful money and to relieve oneself from the burden of an ill-gotten gain.
But it should be remembered that this amount is unclean only for the person who has received it as interest. The poor persons who get it from him as charity can use this amount for their personal benefits.
You may give the interest money to your relatives who are entitled to receive Zakaat.
(Contemporary Fatawaa: pg. 242, Idara-e-Islamiat)
 
And Allah Ta’āla Knows Best
Ridwaan Ibn Khalid Esmail {Kasak}
Student Darul Iftaa
Katete, Zambia 
Checked and Approved by,
Mufti Ebrahim Desai.