This passage deals with the problem of those hypocritical Muslims who had accepted Islam in Makkah and other parts of Arabia but had not emigrated, to Madinah. They lived as before with their people, and took more or less a practical part in all their hostile activities against Islam and the Muslims. They had become a very difficult problem for the Muslims who did not know how to deal with them. Some Muslims were of the opinion that they were after all "Muslim" because they recited the kalimah (the article of the Muslims' Faith), offered the Salat, observed the Fast and recited the Qur'an. Then how could they be dealt with like the disbelievers? Allah in this passage has removed that difference of opinion from among the Muslims and told them how to deal with them.
At this place one should clearly understand why those Muslims who did not emigrate to Madinah were declared to be hypocrites; otherwise one might not be able to interpret correctly this passage and the like passages of the Qur'an. The fact of the matter is that when the Holy Prophet migrated to Madinah and conditions were created there for the fulfillment of the requirements of Islam, a general order was given that all those Muslims who were oppressed in any place and in any tribe or clan and could not freely carry out their Islamic obligations, should migrate to Madinah, "the Abode of Islam." As a result, all those who could emigrate but did not do so because they loved their homes, their relatives and their interests more than Islam, were declared to be hypocrites. Only such of those as were really being prevented by impediments were declared to be helpless in verse 97 of this Surah.
It is obvious that the Muslims living in the "abode of unbelief" may be declared hypocrites for not migrating only if a general invitation is extended to them by the people living in "the Abode of Islam", or at least the doors of" the Abode of Islam" are kept open for them. In such a case all those Muslims who may be doing nothing to change "the abode of unbelief" into "the Abode of Islam", nor emigrate to "the Abode of Islam", even if they could, would be declared hypocrites.
Allah turned the hypocrites back to their former unbelief because they followed a double-faced policy and were time-servers. As they preferred the life of this world to that of the Hereafter, they had entered the fold of Islam with some mental reservations. They were not prepared to sacrifice those interests which came into conflict with the requirements of the Faith and they did not have that firm belief in the Hereafter which makes one sacrifice with perfect peace of mind this world for the sake of the Next World: It has thus become obvious that the line of demarcation was so clearcut that there ought not to have been two opinions about hypocrisy.
Here the Muslims have been asked to catch hold of those hypocrites who belonged to the belligerent disbelievers and were actually engaged in hostile activities against the Islamic State.
The exception is only concerning the first part of the Command. Though the blood of such a hypocrite is lawful, he is not to be pursued and killed, if he has sought asylum in the territory of a non-Muslim State, which is an ally to the Islamic State. This is not because of the sanctity of the blood of the hypocrite but because of the sanctity of the treaty.