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:

ASAK,

Please let me know about the zakat on shares withheld, borrowed money and lended money.

AH

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Answer:

Zakah on loan borrowed money

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 of their own, is liable to pay a 2.5% zakat of their nett excess wealth in Shariah.

Zakat is not determined from one’s earnings, but rather on one’s 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 asset…then 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 one’s 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.

Ref: Zakah on borrowed money

The zakah dues are only payable on one’s nett excess wealth; thus if one has borrowed some money or taken a loan, that wealth does not belong to him but belongs to the one who has given the loan, thus it is the one who has given the loan who will be liable to pay the zakah. The one who has borrowed the money is not liable to pay zakah on that borrowed amount.

Ref: zakah on ‘lent’ money

If one lends some amount to another, one would still be considered the inherent owner of that wealth….thus one must pay 2.5% of the amount he lent as ‘zakah’.

Ref: zakah on withheld shares

If the shares are inherently owned by one and only withheld by the company or the institution due to a legal reason or technicality, then it would be considered the assets of the person and he would be liable to pay 2.5% annual zakah on its market value.

But if the shares are withheld by the company or institution and the believer sincerely fears that he may never recover those shares, then it would be considered a loss in his assets and one does not have to pay its ‘zakah’. But in the case one actually recovers the shares which were withheld, one must accurately calculate the zakah for the period they were withheld and pay its past zakah in full when he has possession of those shares.

Whatever written of Truth and benefit is only due to Allah’s 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