Short answer
No. Interest is not lawfully yours, so it cannot count as zakat, which must come from halal wealth you own. Hanafi scholars say to give the interest to the poor without hoping for reward, to rid yourself of it, and then pay your zakat in full from your own money. Zakat is due on your savings, not on the interest.
Interest (riba) is unlawful wealth that must be got rid of by giving it to the poor without intending reward. Giving it as zakat does not discharge the zakat. Zakat is worked out on the principal and other lawful wealth only.
The four schools agree on this.
Explanation
Zakat is an act of worship, and the Prophet ﷺ said that Allah is pure and accepts only what is pure. Interest from a bank account was never lawfully yours, so giving it away is not your charity. It is returning something you should not have. That is why it cannot stand in for zakat, which must come from your own halal wealth. The four schools agree on this.
What to do with interest you could not avoid: do not spend it on yourself. Hanafi muftis say to give it to poor people, with the intention of getting rid of it rather than earning reward. See what to do with haram money and is bank interest on savings haram.
When you work out your zakat:
- Count your savings, deposits and fixed deposits at their principal amount.
- Leave out interest you are going to give away.
- Pay 2.5 percent of your zakatable total from lawful money.
The same applies to other unlawful money, such as winnings from gambling or money taken wrongly. There is no zakat on it, because none of it is yours: the whole of it must be returned to its owner, or, if that is impossible, given away. For ordinary savings, see zakat on money in the bank.
The evidence
Quran, Surah Al-Baqara 2:276
يَمْحَقُ ٱللَّهُ ٱلرِّبَوٰا۟ وَيُرْبِى ٱلصَّدَقَٰتِ ۗ وَٱللَّهُ لَا يُحِبُّ كُلَّ كَفَّارٍ أَثِيمٍ ﴿٢٧٦﴾
Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.
Interest and charity are opposites, so one cannot be counted as the other.
Quran, Surah Al-Baqara 2:267
يَٰٓأَيُّهَا ٱلَّذِينَ ءَامَنُوٓا۟ أَنفِقُوا۟ مِن طَيِّبَٰتِ مَا كَسَبْتُمْ وَمِمَّآ أَخْرَجْنَا لَكُم مِّنَ ٱلْأَرْضِ ۖ وَلَا تَيَمَّمُوا۟ ٱلْخَبِيثَ مِنْهُ تُنفِقُونَ وَلَسْتُم بِـَٔاخِذِيهِ إِلَّآ أَن تُغْمِضُوا۟ فِيهِ ۚ وَٱعْلَمُوٓا۟ أَنَّ ٱللَّهَ غَنِىٌّ حَمِيدٌ ﴿٢٦٧﴾
O you who have believed, spend from the good things which you have earned and from that which We have produced for you from the earth. And do not aim toward the defective therefrom, spending [from that] while you would not take it [yourself] except with closed eyes. And know that Allah is Free of need and Praiseworthy.
Charity is to come from good, lawful earnings.
Sahih Muslim 1015
Sahih... إن الله طيب لا يقبل إلا طيبا ...
"Allah is pure and accepts only what is pure."
Charity is accepted only from lawful wealth.
Sahih al-Bukhari 1410
Sahih... من تصدق بعدل تمرة من كسب طيب ولا يقبل الله إلا الطيب ...
"Whoever gives in charity the equal of a date from lawful earnings, and Allah accepts only what is good, ..."
The reward of charity is tied to its coming from lawful earnings.
Where the ruling is recorded
- Radd al-Muhtar, Kitab al-Zakat, on wealth acquired unlawfully. There is no zakat on unlawful wealth; all of it must be returned to its owner or given away.
- Contemporary Fatawa (Mufti Taqi Usmani), Section on riba and banking. Interest received is given to the poor without the intention of reward, and is not counted as zakat.
Checked by our team. For a more accurate answer to your own situation, consult a scholar. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.