Kamis, 02 Juni 2011

The Zakat of Property

The Zakat of Property
This letter describes when to pay and how to calculate the amount of the Zakat of money. 

Zakat is a certain amount of money that every adult, free, mentally stable, and financially able Muslim, male and female, has to pay to support the specific categories mentioned in the surah (verse) of At-Tawbah. Allah azza wa jall says: "Alms are for the poor and the needy, and those employed to administer the (funds); for those whose hearts have been (recently) reconciled (to Truth); for those in bondage and in debt; in the Cause of Allah; and for the wayfarer: (thus is it) ordained by Allah, and Allah is full of knowledge and wisdom." (The Holy Qur'an 9:60).
The obligatory nature of Zakat is firmly established in the Qur'an, the Sunnah (or hadith), and the ejmaa' (the agreement of the companions). In the Qur'an, Allah azza wa jall says : "... And there are those who hoard gold and silver and spend it not in the Way of Allah: announce unto them a most grievous chastisement. On the Day when it will be heated in the fire of Hell, and with it will be branded their foreheads, their flanks, and their backs.- 'This is the (treasure) which ye hoarded for yourselves: taste ye, then, the (treasures) ye buried!'" (The Holy Qur'an 9:34-35).
The prophet salla Allah u alihi wa sallam said: "Any owner of gold and silver who does not deliver from them their right, on the Day of Quiyamah (Day of Judgment), (the gold and silver) will be shaped as foils of fire. Then it will be heated in the fire of Hell; (and) then with it he will be ironed on his side, his forehead, and his back" (narrated by Muslim).
It is agreed between Muslims in all the centuries the obligatory nature of paying Zakat for gold and silver, and from those the other kinds of currency.
The Zakat of Property: Gold, Silver, and Currency
Zakat is obligatory when a certain amount of money, called the nisab is reached or exceeded. Zakat is not obligatory if the amount owned is less than this nisab. The nisab (or minimum amount) of gold and golden currency is 20 mithqal, this is approximately 85 grams of pure gold. One mithqal is approximately 4.25 grams. The nisab of silver and silver currency is 200 dirhams, which is approximately 595 grams of pure silver. The nisab of other kinds of money and currency is to be scaled to that of gold, 85 grams of pure gold. This means that the nisab of money is the price of 85 grams of 999-type (pure) gold, on the day in which Zakat is paid.
When is Zakat Due ?
1. Passage of One Lunar Year:
Zakat is obligatory after a time span of one lunar year passes with the money in the control of it's owner. Then the owner needs to pay %2.5 (or 1/40) of the money as Zakat. (A lunar year is approximately 354 days).
2. Deduction of Debts:
The owner should deduct any amount of money he or she borrowed from others; then check if the rest reaches the necessary nisab, then pays Zakat for it.
If the owner had enough money to satisfy the nisab at the beginning of the year, then the money increased (in profits, salaries, inheritance, grants...etc.), the owner needs to add the increase to the nisab amount owned at the beginning of the year; then pay Zakat, %2.5, of the total at the end of the lunar year.(there are small differences in the fiqh schools here) How to Calculate the Zakat of Money :
Example :
A person inherited $3000 at the beginning of the year. The amount increased during the year, to reach $5000 at the end of the lunar year. What is the nisab and how much is the Zakat, if applicable ?
Calculation :
The minimum amount that Zakat is paid for is :
nisab = 85(grams)*383($/oz)*(1/29)(oz/gram) 
      = approximately $1150
($383 is the price of one ounce of gold in the U.S.A. on August 1st, 1995) This owner has $5000, which is more than the minimum nisab. Hence the owner needs to pay the Zakat :
zakat = 0.025*$5000
      = $125

Zakat paid on property

Question:
I had some inheritance money which was lying as cash for 2 years but now i have bought some property from that money. My intention is not clear at this point whether I will sell this property or use it to build a house for my self. Yes i have to pay zakat on the cash i kept for two years. But please let me know, will I have to pay zakat on this land? 

Answer:

Walaikum assalam wa rahmatullah,

I pray this finds you in the best of health and spirits.

You would not have to pay zakat on the property at present, because the default is that land is acquired for personal ownership. If you then sell it, zakat would be due (with other zakatable wealth) on the funds. (Ibn Abidin, Radd al-Muhtar)

Please search SunniPath Answers (http://qa.sunnipath.com) for related answers.

Faraz Rabbani

 

Zakat on loans, Government bonds, provident funds, LIC Etc.


VII. Zakat on loans, Government bonds, provident funds, LIC Etc.

Zakat is payable on loans advanced by you to your friends and relatives. It should be treated as cash in hand and Zakat is payable on it. You may deduct loans payable by you if any for arriving at the net amount. Zakat is also payable on all Government Bonds such as Indira Vikas Patrika, IDBI Bonds, Units, LIC Paid up Premiums and all such Postal Savings Certificates Etc. Zakat is also payable on Provident Funds, Earnest Money Deposits in case of contractors, Tender Deposits, Government Bills Receivable, Security Deposits etc.


Zakat on Company shares and mutual fund.

You should pay Zakat on investment in Company Shares calculated at quoted value on the date of Zakat calculation. If the share of your company is not quoted in any stock exchange, then you may use the services of a chartered accountant to arrive at the value. Similarly Zakat is payable on all Mutual Funds, private chits and chit funds. Your contribution in chit funds till the date of Zakat calculation may be taken into account. If you have withdrawn any amount then the net amount should be taken. 

Zakat on business stock:-

IV. Zakat on business stock:-

No matter what your business is you have to pay Zakat on all Stock in Trade. The stock must be valued at Cost price (Purchase Price Plus Transport, Insurance etc). If you have any bills receivable from your customers you must add the same. The following amounts are detectable from the above a) All amounts due to your suppliers.
b) All loans on stock on the date of calculation.
Dead stock should also be taken into account at the discount rate (i.e. if sold in the open market by way of discount sale etc). You should not calculate dead stock at Purchase Rate or Cost Price. Damaged stock need not be calculated at Cost Price but at scrap value. Pay Zakat on your net stocks as per above calculations.
Zakat is payable on all business stock including old parts, scrap, cars if you are in the car business (excluding taxies, lorries, pick-ups, auto, meant for transport business). Even on pan shop stocks Zakat is payable. Hence Zakat is payable on all business stock after adding bills receivable and deducting bills payable. Allah has promised to protect your stocks on which you pay Zakat regularly. By paying Zakat you are creating the best insurance on your stock. 



Zakat on factory building, machinery and goods produced:-

There is no Zakat on factory building or any kind of machinery, but there is Zakat on products produced in the factory (finished stock). If there is any loan or liability on the finished stock you should deduct the same for calculation of the stock value. Similarly amount receivable on credit sales should be added to the nett stock. Bad debts should be deducted from nett calculation. Sometimes bad debts are recovered and you should pay Zakat on such recoveries in the year of recovery only and not retrospectively. There is no Zakat payable on vehicles used for personal transport and factory goods transport. 

Zakat on Landed property

III. Zakat on Landed property

Zakat is not payable on the following properties. 
a) Personal residential houses even if they are more in number meant for residential purposes only.
b) Property given on rent irrespective of the number
c) Agricultural land, if meant for agricultural and farm house (if any) on agricultural land, servant quarters, godowns, tractors, bullocks and all implements for use at the farm.
d) Open land owned with the intention of building a house in future for self or for the benefit of the family.
Zakat is payable on the properties held with an intention to sell at a future date for a profit or as an investment. However, if your intention on holding the properties changes in the current year i.e. from self use to business purpose, be honest to Allah and pay Zakat on it at the current market value from the year your intention has changed.


If you have sold a property which was meant for business and have entered into an agreement of sale on the balance of money receivable on the date of Zakat calculation, Zakat is to be paid on such amount receivable.
Any loans taken for purchase of property meant for business should be deducted from the nett figure before calculating Zakat.

If you are a builder and in property business, (Purchase and sale or develop and sell), on all completed unsold portions you have to pay Zakat at the prevailing market value. Zakat is also payable on amounts of instalments receivable on such portions after deducting loans or liabilities payable on the same.

On property in the form of building, shops, godowns or land if meant for property business Zakat is payable. There is a misconception that there is no Zakat on property even if it is for business. This is not correct. However, there is no Zakat on property occupied for running your business like shop, showroom, godown, factory building, poultry shed, cattle shed etc. If any property is held jointly by two or more persons the individual must calculate Zakat on his share in the property.

 
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