Zakah on savings.
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:
As Salaam Alaikum
We, high school friends has made an organization where we contribute money to a bank account. The purpose is, to use the money in future to do something for us, such as, buy a land, build houses for us when we will be old. So the money has been accruing all the time to this account. My question is, do we have to pay Zakah on this money? If so, how can we do this?
Jazak Allah Khairan for your answer.
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Zakah on savings
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.
The savings of an individual or group would indeed constitute a part of ones excess wealth, and if the total value of ones wealth is above the prescribed limit of nisaab, one would indeed be liable to fulfill its annual zakah.
Lets say five of you contribute $100.00 monthly to this saving scheme of yours, and each of you have paid $100.00 monthly for three years which have been accrued in the said account. Thus each persons contribution would be ($100 x 12 x 3) or $3,600.00, and each person will be liable to pay 2.5% of his contribution of $3,600.00 or $90.00 annually as their obligatory zakah dues.
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,