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,
May I know the condition & requirement of Zakat on business.
As I heared Zakat is necessary on the fixed deposits of the company.
But few days ago some one suggest me to pay on stock also.
Whereas most of my stock is not 1year old. May be some of it
is above 1yr. How to calculate on moving/dead stocks.

(There may be some grammatical and spelling errors in the above statement. The forum does not change anything from questions, comments and statements received from our readers for circulation in confidentiality.)

Answer:

Zakah on trading stock

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.

If the total nett 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$1,000.00), 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 one’s total nett worth is less than the prescribed ‘nisaab’, then one do not have to pay any ‘zakaah’ on their wealth. In principle, zakah is to be paid every year on the excess wealth of every believer after it has been in their possession for a period of one calendar year.

Indeed the ‘stock-in-trade’ is considered amongst the assets and net worth of an individual in Shariah, and thus one would be liable to pay annual ‘zakah’ on their ‘stocks-in-trade’ of their businesses.

If one has ‘stock-in-trade’ in a business, it is possible that, due to one’s constant buying, selling and trading in the business, one may not have or hold the exact same ‘item’ or ‘stock’ for a period of one calendar year; but one still holds the ‘stock-value’ from the beginning of the year until the end of the year.

Thus for example, the value of one’s ‘stocks-in-trade’ at the beginning of the year was $10,000.00, and after the normal selling and buying of stock in the business in the course of the year, the closing inventory shows the net value of the stocks at $12,000.00….then one is liable to pay zakah of 2.5% on the stock-value of one’s closing inventory for the following 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