Purpose –The purpose of this study is to examine the legal authority of the time value of money in Islam andits application in contemporary Islamic finance. The study aims to establish the Islamic conceptual foundationsof TVM and differentiate it from that of conventional finance particularly in relation to the concept of timepreference that constitutes essential basis for TVM in conventional finance.Design/methodology/approach – This study undertakes a library research where the literature on Islamicjurisprudence in the area of Islamic financial transactions as well as Islamic economics, both in Arabic andEnglish is reviewed critically to construct the conceptual framework of TVM from an Islamic perspective.Findings– The findings indicate that Islam recognizes the legitimacy of the time value of money emanatingfrom deferral (ajal) and acceleration (‘ajal) in Islamic financial transactions such as deferred sale and bilateralrebate (da‘ wata‘ajjal) but its application must be in conformity with specific guidelines laid down by theShari‘ah to avert unfair economic effects of financial transactions such as interest (Riba). The application ofTVM in accordance with its fundamental rules can actually remove Riba from the economy and prevent frommaking of money out of money.Practical implications – The findings of this study have a great contribution in establishing the concept of TVMand its general parameter in Islamic finance.Originality/value – It has significant implications for regulators, industry players and practitioners because itprovides a clear Shari‘ah viewpoint on TVM and general parameter of its application in Islamic finance.