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On the question of Zakat, is Zakat due on new wealth created and held for a year or whatever a person possesses at the end of the fiscal year.

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One of our brothers/sisters has asked this question:

As-salaam alaikum wa Rahmatullahi wa barakatuh

On the question of Zakat, is Zakat due on new wealth created and held for a year or whatever a person possesses at the end of the fiscal year.  Specifically my question is if I have a savings of $100 at the end of the fiscal year, zakat would be 2.5% or $2.50. The following year I have not added any new wealth so is the zakat due on $97.50?  If I have added another $100 for that year then is Zakat due on $197.50 or just the added savings of $100 for that year.

 

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Answer:

 

Annual zakah

In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is none worthy of worship but Allah Alone, and we bear witness that Muhammad (saws) is His slave-servant and the seal of His Messengers.


 

Every believer, regardless of whether man, woman, or child, who has excess wealth over the nisaab (which is appx US$1,000.00) of their own, is liable to pay a 2.5% annual zakat of their nett excess wealth in Shariah.

 

Zakat is not determined from ones earnings, but rather on ones net excess wealth which is left over after paying all their expenses, and it has been in their possession for a period of one calendar year. There is no zakah liable on the house one lives in, or the furniture and fixture one uses in their house, or the car one drives, etc. But if one has property which one has bought as an investment, or spare vehicles other the one one drives, or jewelry, or any other excess assetthen zakah would be liable on these excess wealth and property.

 

Any asset, or wealth, or cash, or savings, which are left over after all of ones expenses are paid, and that excess savings and wealth has been in their possession for one full calendar year is liable for payment of annual zakat at 2.5% of its value.

 

Your Question: is Zakat due on new wealth created and held for a year or whatever a person possesses at the end of the fiscal year. 

Provided ones nett excess wealth is over the limit of nisaab, one would be liable to pay zakah on ones nett excess wealth annually every year at the rate of 2.5%. Thus, in essence one would have to add the excess new wealth created to ones previously possessed excess wealth, and if it has been in ones possession for a period of one calendar year, one would be liable to pay zakah on its value.

 

Your Question: Specifically my question is if I have a savings of $100 at the end of the fiscal year, zakat would be 2.5% or $2.50. The following year I have not added any new wealth so is the zakat due on $97.50? 

Indeed if ones nett excess wealth for the past fiscal year was $100.00, then one would be liable to pay $2.50 zakah for that year. If in the following year, no extra wealth was added, then the person would indeed be liable to pay his zakah on $97.50 for the present fiscal year. That is precisely why the Messenger of Allah (saws) guided the believers to not leave their assets idle, but rather invest them so that their wealth is not depleted by the payment of zakah.

 

Amr ibn Shuaib reported from Abdullah ibn 'Amr that the Messenger of Allah (saws), said: "One who becomes the guardian of an orphan with property must trade on his behalf and not leave it passive in order to avoid depletion of the property by zakah."

Related by al-Hafiz.

 

Your Question: If I have added another $100 for that year then is Zakat due on $197.50 or just the added savings of $100 for that year.

If the $100.00 were added to the previous nett excess wealth of $97.50, and both the amounts were in ones possession for a period of one full calendar year, then indeed the zakah for the current year would be determined on the total $197.50.

 

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,

 

 

Burhan


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