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:

Dear Sir,

Assalaamualikum wa Rahmatullahi wa Barakatuhu.

Sub : Calculartion of Zakah.

I am working in Saudi Arabia for the last 20 years. In these years whatever the income I get from here as well as from my birth place, on all savings, I used to calculate Zakah and pay every year. Since last year I am not understanding how to pay it? Can you please elaborate and advise me. I have three apartments in my native place where I get a definite amount of income every year. Here I have a job also where the income is fixed. In my last vacation in 2005 I did perform the marriage of my daughter where I met the expenses of the marriage by taking loan from friends and from bank as the cash which I was having, was not enough. Since then I have been paying the loan and still it will take some more months to clear it. The income from the apartments is still there which is being paid for the loan and also from my salary I am paying for the loan after taking out all the expenses for my family. The gold ornaments of family is still there as I am confident to pay my loan with my salary and income. Now how to calculate and pay the Zakah?

One more question is : 3 Years back the bank was giving loan which I took and invested the whole amount with one my friends. I am still paying the loan to bank and I will be paying for two more years. The monthly payment is directly deducted from my salary by the bank. Till now no income has been generated from the investment. On this amount do we have to pay Zakah. If we have to pay how to calculate and pay?

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Answer:

Zakah determination

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 one’s earnings or profits, 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 than 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.

Thus the basic formula to calculate zakah is as follows:

All Assets (except the house one lives in, vehicle one uses, etc.) minus all loans = Nett Excess Assets. It is on the market value of these Nett Excess Assets upon which the annual zakah of 2.5% is due.

Now how to calculate and pay the Zakah?

Only as an example, we shall put a value on every asset and every loan which you have mentioned in your notes; Insha Allah that should give you a clearer picture on how to determine your Nett Excess Assets.

Assuming that what you have declared are all your assets:

1. I have three apartments in my native place

The market value (not original bought price) of each apartment is say $50,000.00; thus the total value of the three apartments would be $150,000.00.

2. Here I have a job also where the income is fixed.

Zakah is liable only on assets and not on earnings; thus regardless of your earnings per month or year, there is absolutely no zakah on the earnings itself.

3. In my last vacation in 2005 I did perform the marriage of my daughter where I met the expenses of the marriage by taking loan from friends and from bank

Lets assume the loan still outstanding from your friends is $10,000.00 and from the bank $20,000.00; thus total $30,000.00 is the value of the outstanding loans.

4. The gold ornaments of family is still there

Lets assume the total current market value of the gold ornaments is $5,000.00.

5. Years back the bank was giving loan which I took and invested the whole amount with one my friends.

Lets assume the loan you took three years ago was $18,000.00, and you have to date paid $6,000.00 of that loan; thus the value of the amount as your investment in your friend’s business is $6,000.00, and the value of the outstanding loan is $12,000.00.

Thus your Total Assets are:

Three apartments $150,000.00 + gold ornaments $5,000.00 + your share of the investment in your friends business of $6,000.00; Thus your Total Assets are $161,000.00.

Your Total Liabilities (or outstanding loans) are:

Loans from friends $10,000.00 + loan from bank for marriage $20,000.00 + loan from bank for investment $12,000; thus your Total Liabilities are $42,000.00.

Assuming what is listed above are your total assets and liabilities, your Total Nett Excess Assets will be $161,000.00 - $42,000.00 or $119,000.00. Your Zakah for the current year will calculated as 2.5% of $119,000.00 or $2,975.00.

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