An Overview of the types of Wealth which are subject to Zakat-al-Maal

 

Debts owed to a Muslim

Zakat is payable upon the debt where the debtor is sound and is able to pay the debt.

Zakah is not payable upon the debt where the debtor experiences financial hardship and/or delays payment. But becomes payable once the debt is repaid.

The rate is 2,5% – per Hijri year

 

Cash

Money

The minimum threshold is based on the threshold of either silver or gold.

(Interest must be excluded)

The rate is 2,5% – per Hijri year

 

 

Investment Accounts

Zakah is levied on the balance of the Investment Account (total of the principle amount in addition to the profit made on the account).

(Interest must be excluded)

The rate is 2,5% – per Hijri year

 

 

Metals

There is a variance in fiqh on personal use items (Jewellery) not being subject to zakat. However, in practice, it is found that zakat is levied on gold jewelry.

Other items would fall into being subject to zakat (Coins – Precious Metal Investments)

Silver – Minimum threshold: 595 grams

Gold – Minimum threshold: 85 grams

The rate is 2.5% on the market value – per Hijri year

 

Investment Funds

Equity Funds (Shares) / Unit Trusts / Mutual Funds

The intention of the asset manager and the investor determine whether zakat is to be levied or not.

  • Where the intention is by both the investor and asset manager to buy and sell the equities as well as obtain dividends then such both the profit of the sale and the dividends are subject to zakat

 

  • The same applies to where only the asset manager has the intention to buy and sell and provide the dividends, as this is the mandate by the investor to the asset manager carry out such a mandate. Thus  profit on the sale and dividends are subject to zakat

 

  • If it is an equity dividend income fund, i.e where the underlying assets are not traded(bought or sold on an ongoing basis), but rather the dividend is yielded and paid to the investor then such dividend is subject to zakat

 

  • Where the asset manager retains both the profit of the sale of shares and the dividend yield, yet the investor invests to trade the shares or the funds, zakat will be levied on the market value of the shares and the dividend yield received (point 2)

 

The rate is 2.5% for the Hijri year

 

 

Sukuk

  • Lease – Zakat is levied on the return proceeds (not the principal value of the paper) (Ijarah)
  • Partnership – Where assets are traded Zakat is levied on the value of the paper and the returns received (Musharakah)
  • Mudarabah (Capital & Effort) – Where assets are traded Zakat is levied on the value of the paper and the returns received.
  • Usufruct – Zakat is levied on the return proceeds (not the principal value of the paper)

The rate is 2.5% for the Hijri year

 

Equities / Bonds / Treasury Paper

  • Treasury Issued Paper / Government Bonds – return interest, therefore only the principal value is subject to zakat, not the returns as the returns are interest income.
  • Shares – held to obtain long term growth and, only the dividend is then subject to zakat
  • Shares – sold and like with other assets are subject to zakat
  • Company Shares – acquired for the purpose of trade in a market, and there are price fluctuations,  there is no zakat levied on it as it is a trade asset(commercial assets). They are not disposed to be reduced to capital.
  • The company may pay zakah where all the investors (Muslims) have authorized such.

The rate is 2.5% for the Hijri year

 

 

Policies

Where policies have either:

  1.  Accessible cash or surrender value
  2. Premiums are accessible
  3. Has an accessible investment cash or savings value

those types of policies would be subject to zakat.

 

Value from Policy subject to zakat

 

During the Term

  • the Surrender Value where Surrender value equates or is less than premiums paid
  • where surrender value is more than premiums paid, only the premiums paid are subject to zakat

 

Year of Surrender

  • the lesser of either the Surrender Value or premiums paid

 

Death

  • The value of the premiums distributed to beneficiaries would then be subject to zakat in their individual capacity.

 

>Zakat-al-Maal

 

 

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