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Zakaat on stocks: A basic guide
And establish prayer and give zakaah and bow with those who bow [in worship and obedience]. (Surah Baqarah: 43)
الزكاة or Zakaat – one of the five pillars of Islam, is a form of obligatory charity. The literal meaning of the word zakaat is “to cleanse” or “to purify”. The other meaning is “to increase”. Paying zakaat purifies our wealth.
Obligation:
لِّلَّهِ مَا فِى ٱلسَّمَٰوَٰتِ وَمَا فِى ٱلْأَرْضِ
To Allah belong all that is in the heavens and all that is on the earth.(Surah Baqarah: 284)
Narrated Jarir bin ‘Abdullah: I gave the pledge of allegiance to the Prophet (pbuh) for to offer prayers perfectly, to pay zakaat regularly and to give good advice to every Muslim.(Sahih Bukhari: 524).
The wealth we possess is only due to the blessings of Allah SWT. Thus, it should be spent as per the commandments of HIM alone. Allah SWT has ordered to give 2.5 % of the wealth if it is more than the nisaab to the poors and needy because it is their right.
Consequences of not paying zakaat:
Narrated by Abu Huraira (r.a.) The Prophet (pbuh) said, “Every day two angels come down from Heaven and one of them says, ‘O Allah! Compensate every person who spends in Your Cause,’ and the other (angel) says, ‘O Allah! Destroy every miser.’ “(Sahih Bukhari: 1442)
As it is clear from the above hadith that angels pray for increase in wealth of those who spend in Allah’s way, and pray for the destruction of those who pull their hand in spending in the ways of Allah. May Allah protect us from His anger and makes us among those who are under His blessings.
Nisaab of zakaat:
Allah SWT has fixed a Nisaab, the minimum amount which if a person possess then zakaat is compulsory on him. If a person has fewer amounts than this, zakaat is not obligatory on him.
The nisab is 52.5 tola ( about 612.15 gm) of silver or cash equivalent of this amount of silver or ornaments(used by women excluding those which are neither gold nor silver, like- platinum, diamonds etc.) or trading goods or shares of companies or amount invested in Mutual Funds, etc. or a combination of these. A person who possesses this quantity of wealth is called Sahib e nisaab.
Who will pay zakaat:
If one lunar year gets completed while remaining Sahib e Nisaab, the Zakaat becomes obligatory. It is a common wrong perception that each of the cash or zakaatable items should complete one year. This is not required at all. Allah SWT has taken care of our difficulties so that one is not unnecessarily involve in Complex calculations. Let’s understand this- Suppose if a person becomes sahib e nisaab on 1st of Ramadhan and when the next Ramadhan comes and on 1st day of it he is still sahib e nisaab, he will pay the zakaat. During this one year whatever amount he receives or spends will not be taken care of. Only the amount of wealth that is available on 1st Ramadhan will be considered, even if some cash or zakaatable item has been received only one day before. It is not necessary to complete one year on this amount also.
Take proper care while calculating Zakaat:
There are many who do not pay zakaat at all. They feel paying 2.5 % zakaat a burden. May Allah protect us from this evil thought. Further, there are many who pay zakaat but do not do proper calculation and pay a lump sum by guess work. Scholars are of the opinion that zakaat should be properly calculated because even if a Rupee of zakaat amount is in our wealth, it is enough to destroy the whole wealth and invites Allah’s wrath. So, proper calculation should be done, it is better if the amount is little more.
Zakaat on trading goods:
If any asset class is acquired with the intention to sell it afterwards, the zakaat is applicable on it. If a plot of land is acquired with the intention to sell, then zakaat will be calculated on the current value of plot. If the plot was acquired with the intention to construct a house and live in it, then there is no zakaat on the plot. However, if the plot was acquired with the intention of constructing a house for living, but after sometimes the intention changed to sell the plot. Then in such case there is no zakaat on the plot till it is actually sold and the amount is received.
:Zakaat on Shares:
There are two situations as far as zakaat on shares is considered:
1.Purchase of shares for Capital Appreciation(gain)-
If at the time of purchasing the shares the intention was to sell them if their value will increase, then in such case zakaat is on the market value of shares on the day of calculation of zakaat, along with other zakaatable items.
2.Purchase of shares for Dividend-
If at the time of purchasing the shares the intention was to hold (no intention to sell) the shares and get the benefit of annual dividend, then in such case the zakaatable amount will be calculated by deducting the percentage of fixed asset out of total asset from the market value of shares. For eg.if a company has 20 % fixed assets ( property, plant and equipment) and the market value of shares is say, Rs 1000, then zakaat will be calculated as 2.5% of 80% of market value of shares, which is 2.5% of Rs 800 = Rs 20 .
Note: If for any company the details of asset could not be ascertained then it better to pay zakaat on the market value of shares.Whom to give zakaat:
Indeed, [prescribed] charitable offerings are only [to be given] to the poor and the indigent, and to those who work on [administering] it, and to those whose hearts are to be reconciled, and to [free] those in bondage, and to the debt-ridden, and for the cause of Allah, and to the wayfarer. [This is] an obligation from Allah. And Allah is all-knowing, all-wise. (Surah- Tawbah, 9:60)
Zakaat can be given to the following:
The poor (al-fuqarâ’), meaning low-income or indigent.
The needy (al-masâkîn), meaning someone who is in difficulty.
Zakat administrators appointed by the Khalifa
Those whose hearts are to be reconciled, meaning new Muslims and friends of the Muslim community.
Those in bondage (slaves and captives).
The debt-ridden.
In the cause of Allah not for construction of mosque, madrasa, community centres, etc.)
The wayfarer, meaning those who are stranded or traveling with few resources.
Note: The zakaat must be given with the intention at the time of payment. Recipients need not know that he/she is receiving zakaat. Zakaat must be given to the recipients in order to make them the owner of the amount being paid.
