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:
Kindly answer urgently for these questions. Although I read all replies in zakat, still I would need the answers..
1. I have invested X amount on a business little over one year ago. Monthly I am getting some income from it. Should I pay zakat on this X amount or the from the returns of it?
2. Since little over a year ago I invested on a shop and still paying for it as the shop is not completed. Until now I paid Y amount, should I have to pay zakat on this Y amount?, or on the amount completed a year , please answer or I need not pay as there is no income from it so far?.
3. Suppose after all calculations from above I do not have enough money to pay zakat on the due date , what has to be done?
4. Is these X and Y amount are considered excessive investment
A Brother in Islam
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If the total net worth of any believer (man, woman, or child) is more than the prescribed nisaab of 7.5 tolas of gold (app. 85 grams or app. Value US$2,100.00), then the person is liable to pay the obligatory annual zakah of 2.5% on their excess wealth which has been in their possession for a full calendar year.
If the total net worth of any believer is less than the prescribed nisaab, he/she is not liable to pay any zakah until their net worth exceeds the prescribed nisaab.
For the purpose of determining zakah, the Net Excess Assets would be the current market value of all of ones assets (properties, investments, jewelry, cash, etc.) except:
- the value of the house/s 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.
Q-1: I have invested X amount on a business little over one year ago. Monthly I am getting some income from it. Should I pay zakat on this X amount or the from the returns of it?
The income which you receive monthly is absolutely irrelevant when determining zakah, for zakah in Islam is determined on the net excess assets of the individual and not on the monthly or yearly income.
Lets assume that you invested 100,000.00 in the business, and the market value of that investment after one year is 120,000.00..you would be liable to pay 2.50% of 120,000.00 or 3,000.00 as the zakah for this year.
Q-2: Since little over a year ago I invested on a shop and still paying for it as the shop is not completed. Until now I paid Y amount, should I have to pay zakat on this Y amount?, or on the amount completed a year , please answer or I need not pay as there is no income from it so far?.
Respected brother, regardless of whether or not you derive any income from the shop, you would be liable to pay zakah on the market value of your investment in the shop; because zakah in Islam is determined on the fair market value of the asset and not on the income of the asset.
Lets assume that the shop was bought for 10,000.00 a year ago and so far you have paid only 5,000.00. Today the fair market value of the property is 25,000.00. In such a scenario, you would be liable to pay your zakah on the 15,000.00 (capital gains on the property) + the 5,000.00 (your original investment) at 2.50%. Thus your zakah for the year on this particular property would be 2.50% of 20,000.00 or 500.00.
Q-3: Suppose after all calculations from above I do not have enough money to pay zakat on the due date , what has to be done?
It would obviously be best and purest that you pay the zakah on its due dates. If for any reason you do not have enough funds to pay the zakah, it will remain a debt upon you unto your Lord until you fulfill it.
Q-4: Is these X and Y amount are considered excessive investment
If the value of your total assets are more than the prescribed nisaab, indeed the x and Y amounts which you have invested would be amongst your excess assets and you would be liable to pay the annual zakah of 2.50% on the market value of your net excess assets, provided that asset has been with you for a period of one full lunar year.
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,