Mu' meneen Brothers and Sisters,

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One of our brothers/sisters has asked this question:

Assalamu Alaikum,

Dear Sir,

Please clarify the following on Zakat ;

If someone has a building other than his living house and the same is being rented to others. In this case, should he pay Zakat for the whole building or for the income(rent) only ? If Zakat is payable for the building, should it be calculated the prevailing value of the building and what is the rate ?

Thanks

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Answer:

Zakah calculations

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 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.

Your Question: If someone has a building other than his living house and the same is being rented to others.

If the property or building has been bought as an investment and one does not themselves stay in that property, then indeed one would be liable to pay 2.5% of the market value of that building as its annual zakah dues.

Your Question: In this case, should he pay Zakat for the whole building or for the income(rent) only?

Zakah is determined on the market value of the Asset, not the income it generates. Thus if one buys some property as an investment, and even it that property does not generate any income whatsoever; one would still be liable to pay 2.5% of the market value of their property every year as zakah.

Your Question: If Zakat is payable for the building, should it be calculated the prevailing value of the building and what is the rate ?

Regardless of the price one originally paid for the property, one is liable to pay the 2.5% zakah annually on the current market value of the property.

Thus lets say one bought the property for $50,000.00, but today the market value of the property is only $10,000.00; one would be liable to pay 2.5% of $10,000.00 or $250.00 as its zakah for the current year.

Similarly if one originally bought the property for $10,000.00, but today the market value is $100,000.00; then one would be liable to pay 2.5% of $100,000.00 or $2,500.00 as its zakah for the current year.

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