1. Do we have to pay zakat on the money invested.
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 need some clarification on zakat. Me and couple of my cousins have together invested in a Pre-launch flat where we together paid the booking amount and then the 2nd installement. The flat is not yet constructed but we just have the receipt from the group as an investment towards their project.My queries are
1. Do we have to pay zakat on the money invested
2. We had received some discount from the dealer through whom we booked and the discounted amount equivalent is included with our payment for the booking with the company by the dealer. Do we have to pay zakat on the discount amount as well.
3. One of my cousin does not have their own house here but they do have ancesteral house at the village where their mother and one of the brother lives.Does he also have to pay zakat on full amount of his investment
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Lets make a few assumptions with numbers so that the matter is absolutely clear:
- The actual total value of the flat quoted is 110,000.00.
- The discount that you received from the dealer is 10,000.00; thus the value of the flat for you is 100,000.00.
- You and two of your cousins together paid 15,000.00 (5,000.00 each) towards a down payment for the flat.
Q-1: Do we have to pay zakat on the money invested
Regardless of whether the flat is constructed or not, at the end of the calendar year each of you will be liable to pay zakah on their respective share of the investment at the rate of 2.50%.
Q-2: Do we have to pay zakat on the discount amount as well.
Each of you is liable to pay zakah on your respective share of the market value of the property.
Assuming that at the end of Year-1, you have paid no further installments other than the first booking amount (of 5,000.00 each), and the market value of the flat has increased from 100,000.00 to 130,000.00. In such a situation each of the three of you would be liable to pay the following zakah:
5,000.00 (initial contribution of each) + 10,000.00 (share in the increase of each investor on the market value of the property) = 15,000.00 at the rate of 2.50% or 375.00 each.
Q-3: One of my cousin does not have their own house here but they do have ancesteral house at the village where their mother and one of the brother lives.Does he also have to pay zakat on full amount of his investment.
For the purpose of determining zakah, the Net Excess Assets would be the current market value of all of ones assets (properties, jewelry, cash, etc.) except:
- the value of the house one owns and actually lives in
- the value of the car/vehicle one uses on a regular basis
- the value of the furniture and fixtures one uses on a regular basis.
The house one lives in is exempt from any zakah in Shariah; thus if the ancestral house legally belongs to your cousin, or his brother, or his mother and they actually live in it, that particular property is exempt from any zakah.
The investment of your cousin made in the purchase of the new flat has absolutely no relation to his share of the ownership of his ancestral home; he will be liable to pay his annual zakah on all his other excess assets, regardless of whether he actually owns his own home or not.
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Your brother and well wisher in Islam,