Zakat on gold, land and stocks
Fatwa No: 90162

  • Fatwa Date:13-6-2005 - Jumaadaa Al-Oula 7, 1426
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Question

I need to pay Zakaat on the gold I own. It is around 500gm. I don't know if this amount is correct as in Pakistan the unit of measurement is called 'Tola', which approximately equals 10gm. I have 50 Tolas of gold. Can you please tell me how much Zakaat is due on it per year? Besides my husband owns property in the form of land this is how he plans to invest his money, so that he can sell it later if need be. He has invested in 2750 sq yards of land. The payment for this land is being done in installments, only the first one has been made, so he still has to make plenty of installments before he owns it. Does he have to pay Zakaat now, and if so how much/year. The land once bought will cost 100000$ Inshaa' Allah.
We also have some cash in stock markets, do we pay Zakaat on that and again how much. We are very god fearing and know that Zakaat is one of the pillars. I mean it's been a year since we've been married and haven't paid any Zakaat till now, so we were worried.

Answer

All perfect praise be to Allah, The Lord of the Worlds. I testify that there is none worthy of worship except Allah, and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His slave and Messenger.

If you possess the gold that one is obliged to pay Zakat on (i.e. if your gold reaches the Nisaab –which is the minimum amount liable for Zakat), then you have to give 2.5% from the gold itself; on each 500 grams of gold you have to give out 12.5 grams of gold for Zakat.

In principle Zakat has to be paid from the gold itself and not from its value. However, if you wish to give out the value instead of the gold then you have to value the gold that you possess according to the market price when Zakat is due and then pay out 2.5%.

As regards to the land that was bought by your husband, if he bought it with the intention of trading, it is considered as a tradable item. He has to see whether he has other money with which he can pay the debts that he has. So he has to pay 2.5% Zakat on this land when a whole lunar year elapses and according to its market value. If he has no other money to pay the debts, then he is not obliged to pay Zakat on this land.

However, if he had bought the land while being undecided whether to own it or to sell it, then he has to look to his intention, if he was more inclined to sell it and invest it, he has to pay Zakat on it as previously discussed, but if he was more inclined to possess it, then he does not have to pay Zakat on it according to the Hanbali school. The author of Zaad (a Hanbali Book) stated, “If one possesses a property by inheritance or by his own endeavor without having the intention of trading, and then he intends to trade with it, then his intention remains as it was originally.

With regard to the shares, first it should be noted that a Muslim should seek lawful transactions as it is not permissible for him to invest his money in a company whose transactions are forbidden because in that manner he is as much a partner in this forbidden work as the shares he possesses.

Zakat on shares should be paid as follows:

1 - If he invested in the company with the intention of benefiting from the annual profit of the shares and not with the intention of trading, then he has to pay Zakat on it as if it is an estate or non-agricultural rented land, and so forth. This means that there is no Zakat on the origin of the share but on its profit, so he pays 2.5% when a complete lunar year elapses on the day during which he received the profit. This is the case if the shares of the company are fixed assets, like estates, boats and factories. However, if these shares are tradable items, then Zakat has to be paid on the capital money as well as on the profit.

2 - If the shareholder has obtained the shares with the intention of trading, then he has to pay Zakat on them as tradable items, whether they are fixed assets or tradable items. When a whole lunar year elapses while in his possession, he has to pay Zakat according to the market price regardless of whether the price is the same, lesser or higher than the price he originally bought them for. If there is no market [according to which he will value his shares] then he has to pay the Zakat according to the evaluation of experienced people in the field. He should pay 2.5% from the estimated price and from their profit, if any.

3 - If the shareholder sells his shares during the year, he has to add its amount to his money and pay the Zakat on the total when the Zakat becomes due, but the buyer has to pay Zakat on the shares that he bought - according to what we have already explained.

Finally, it should be noted that if these shares are involved in forbidden transactions, then the shareholder is first obliged to repent to Allah and to stop this forbidden transaction. He should pay Zakat on his capital money, but there is no Zakat on the forbidden profit as it has no real owner, and so, he has to spend it on the general interest of the Muslims.

Allah knows best.

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