Is the gain of Rs 5 million made in the month of August 2005 and reinvested in the same month subject to zakat?
Mu' meneen Brothers and Sisters,
As Salaam Aleikum wa Rahmatullahi wa Barakatuh. (May Allah's Peace, Mercy and Blessings be upon all of you)
One of our brothers/sisters has asked this question:
I bought a piece of land in 1998 for Rs 1.5 million for investment purposes. In August 2005, I sold the land for Rs6.million and then added another Rs 4 million, to buy a new piece of land for Rs 10 million.
My questions are:
a) Is the gain of Rs 5 million made in the month of August 2005 and reinvested in the same month subject to zakat?
b) If the land is purchased with the intention of "resale" what would be the zakat position on the principal as well as the gain amount.
c) If the land is purchased with the intention of "investment" what would be the zakat postion on the principal as well as the gain amount.
Could you please provide an urgent response and the month of Ramadahn is appraoching and I want to settle any liabilities due.
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Zakah on Land
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Beloved brother, if the land was bought with the intention of investment or re-sale, then this would be considered as excess wealth, and thus the zakah would be due on the market value of the land on an annual basis.
Regardless of whether the gain on the land was re-invested or not, zakah would be due on the market value of the land on an annual basis from 1998 to 2005.
Thus assuming that the land was bought in 1998 for 1.5m and sold for 6m in 2005, and no zakah was paid on this land over the years; the accrued zakah dues would be approximately calculated as follows:
Year Value Zakah at 2.5%
1998 1.5 m 37,500.00
1999 2.0 m 50,000.00
2000 2.5 m 62,500.00
2001 3.0 m 75,000.00
2002 3.5 m 87,500.00
2003 4.0 m 100,000.00
2004 5.0 m 125,000.00
2005 6.0 m 150,000.00
Assuming that the land was bought with your excess wealth and there were no loans or liabilities taken towards the purchase of the land, the accrued and unpaid zakah for all the years from 1998-2005 on the land would be approximately 687,500.00 which should be settled as soon as possible.
Whatever written of Truth and benefit is only due to Allahs Assistance and Guidance, and whatever of error is of me alone. Allah Alone Knows Best and He is the Only Source of Strength.
Your brother and well wisher in Islam,