Is there Zakaat on long term

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Question

 

Is there Zakaat on long term investments :

  1. 1.Shares on stock market – not for trading but for long term growth
  2. 2.Unit Trusts – not for trading but for long term growth ( eg. Oasis or Albaraka unit trusts taken out for kids )
  3. 3.RA – long term investment
  4. 4.Monthly investment of a fixed amount for long term growth eg. R500 per month in an investment builder

Please advise on above, as I recently heard that Zakaat is only payable on stocks that you trade in, and not on long term investments.

 

Answer

 

In the Name of Allāh, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykumwa-rahmatullāhwa-barakātuh.


The general rule with regards to the zakaat on shares is as follows: if one has invested in a company that trades (buying and selling) in goods, then one will have to pay Zakaat on the share value as well as on the dividends. On the other hand, if the company’s function is property development which it hires out to tenants, then only the yields (returns from the rental) will be Zakaatable and not capital value of the shares. Similarly, Zakaat will only be Waajib on the returns (and not the share value), if the investment is in a company that merely renders services and does not buy and sell, for e.g. a legal firm, accounting firm, etc.

[Fatawaa Rahimiyyah, Vol 3, Pg 111]

 

However, there is a difference of opinion among the Learned Ulama as regards the permissibility of trading on the stock exchange/share market. Unit trusts, Oasis, Albaraka etc. all invest on the stock market. We subscribe to the view of those Ulama who state that it is not permissible to purchase shares in companies that are listed on the stock exchange. This ruling is based on the fact that the purchasing of shares in companies that are listed on the stock exchange does not fall within the ambit of any legal shar’i transaction as pointed out by Hadhrat Mufti Mahmood Hasan Saheb rahmatullâhi alaih (a prominent and renowned Mufti of the Indo-Pak subcontinent), after having been explained the mechanics of the share market system in South Africa.

Another supporting factor is that almost all companies listed on the present stock exchange are in some way involved in an activity which violates the injunctions of Shariah. Furthermore, the dealings of companies trading on the contemporary stock markets are linked with interest-based transactions, hence, for one to be a shareholder of such companies is as though one is indirectly assisting in the promotion of Haraam which has been forbidden in the Noble Quraan.

Hence, any shares that have been purchased in companies listed on the stock exchange should be sold immediately. All amounts above the capital investment (whether through increase in value of shares or dividends upon shares) should be given away in sadaqah to the poor. Zakaat will then only be payable on the capital investment.

In any case, the Honorable Ulama who hold the view of permissibility, such as Mufti Yusuf Ludhyaanwi Ash Shaheed Rahimahullah and Mufti Taqi Uthmaani Daamat Barakaatuhum, are of the opinion that Zakaat on shares of companies doing trade has to be paid on the shares as well as on the yields. Therefore the market value of the shares on the day Zakaat is Waajib will be considered.

[Ref: Contemporary Fatawaa,Pg 84,85; Aap ke Masaa’il Aur un ka Hal, Vol 3, Pg 374,375]


And Allah Ta’aala Knows Best

Darul Iftaa

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  • The Sharée ruling herein given is specifically based on the question posed and should be read in conjunction with the question.
  • The DarulIfta bears no responsibility to any party who may or may not act on this answer. The DarulIfta being hereby exempted from loss or damage howsoever caused.
  • This answer may not be used as evidence in any Court of Law without prior written consent of the DarulIfta.

 

 

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