"Hafiz Saeed should definitely be freed. They are not terrorists, they run a very fine NGO, they contribute to relief activities in post-earthquake and post floods periods in Pakistan. They run great welfare organisations," he said.
Musharraf told a Pakistani TV channel that Saeed's Falah-e-Insaniyat Foundation (FIF) charity - a front for Jamaat-ud Dawah - was engaging "religious" youth in relief and welfare activities, according to a report in Dawn.
"In my opinion they are against Taliban (in Pakistan), they did not commit any terrorism in Pakistan or anywhere in the world. So they should be dealt separately," he said.
The government last month included Saeed on Exit Control List, barring him from leaving the country. He was also put under "house arrest" for 90 days for engaging in activities "prejudicial" to peace and security.
When asked about recent developments regarding JuD, he said, "We (as a nation) remain confused on terrorism, like we are confused in respect to JuD and Hafiz Saeed".
India is against them because their supporters "go voluntarily" to Kashmir to fight the Indian army, he said.
Musharraf also admitted he had received millions of US dollars from Saudi Arabian King Abdullah bin Abdulaziz Al Saud in 2009 to buy apartments in London and Dubai, the report said.
However, Musharraf did not disclose the details, calling it a "private affair".
He also said that Pakistan's Punjab province has become the stronghold of militancy.
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