Islamic Voice
Ramadan/Shawwal 1422
December 2001
Volume 14-12 No:180

News from the Islamic WorldNews  Community RoundupCommunity  EditorialEditorial  Readers CommentsComments  OpinionCommunity Initiative  Book ReviewInsights  Muslim WomenInvestigation  Understanding QuranQuran  HadithHadith  FeaturesFeatures  ReligionBook Review  Quran & ScienceRamadan  Quran & ScienceIslamic Reformation  Our DialogueDialogue  Children's CornerChildren  From Darkness to LightFrom Darkness to Light  MatrimonialMatrimonial  JobsJobs  ArchivesArchives FeedbackFeedback  SubscriptionSubscription  Islamic LinksLinks  Calendar ConvertorCalendar  Contact UsContact Us   

OUR DIALOGUE

By Adil Salahi


Zakah for the Prophet's Descendants
Zakah for Education
How to calculate zakah?
Zakah on Buildings and Land Plots
Zakah on Savings
Zakah on Lettings and Land
Zakah on Business and Investment
Sending Zakah Home
Zakah for Poor Relatives

Zakah for the Prophet's Descendants

Q. Is it permissible to pay one's zakah to people who are Syeds. If not, what about a person whose mother is a Syed while his father is not? Is it permissible to pay zakah to one's own brother or sister?

A. The people who are described as Syed in certain parts of the Muslim world are supposed to be direct descendants of the Prophet Muhammad (Pbuh) through his daughter Fatimah. It is not necessary to call them by any title, but the title Syed is one of respect. The ruling that they may not be zakah beneficiaries is well-known. However, they benefit from other sources which an Islamic state could have. This means that when they have been excluded from the benefit of zakah, other means were open to them which may not be open to other people. This source would ensure that no poor person among them would be left uncared for. However, these means can only be available in an Islamic state which conducts its affairs on the principles and regulations established by Islam. There are very few such states in the Muslim world today.

The question arises here that if such sources are not available today, are the descendants of the Prophet still to be excluded from zakah when they are poor and need help? In his valuable work on zakah and all its aspects, Dr. Yussuf Al-Qaradawi discusses this issue at length and comes in favour of including descendants of the Prophet’s household in the beneficiaries of zakah. This is a view based on a solid argument and evidence. The point about excluding them from zakah is not to deprive them of a benefit, but to give them a better alternative of making ends meet. When that alternative is non-existent, there can be no virtue in depriving them, because that would mean leaving them in poverty. No community of believers may do that to the descendants of its Prophet.

Relatives to whom zakah may be paid are those whom we are not duty bound to support. So we may not pay zakah to our sons and daughters, or to our parents and grandparents, because supporting them is part of our Islamic obligations. A Muslim is not required, by way of duty, to support his brothers and sisters, when they are poor, even if he is much better off. Needless to say, he is strongly recommended to support them, but if he does not, he is not considered to have failed to meet his duty. Therefore, paying them one’s zakah is not only permissible, but strongly recommended. Zakah paid to a stranger is an act of charity, while zakah paid to a relative is both an act of charity and a kindness to kinsfolk.

Top


Zakah for Education

Q. Is it acceptable to use one's zakah for the purpose of the establishment of schools and libraries for the Muslim community in remote areas? Q. How do we calculate zakah for the money one invests?

A. 1. Scholars have been inclined to say that zakah for education is permissible. However, when it comes to the actual usage, problems may arise, such as whether zakah may be used to finance the building or the running cost of a school. A further complication in this regard is the fact that the school may be used by children who do not qualify to benefit by zakah. Hence, scholars prefer that unless the school is built specially for poor people, zakah should not be used to pay for its construction or running costs.

Having said that, there are many ways to use zakah funds in education, such as paying the fees of poor students, or buying their books, or paying for their meals at the school. What is needed for that is to arrive at some arrangement with a school to identify the poor school children and provide them with scholarships so that they can pay their fees and buy their books. If any zakah-payer does that, his zakah will have been well spent.

A.2. Shares and stocks and other forms of investment are all liable to zakah.

Scholars have expressed different views on how to pay zakah for them. The view I am more inclined to is to treat them as commercial commodities, which means that on one's zakah date, one should find out their market value and pay zakah on the basis of that value at the rate of 2.5%. The other view treats them in the same way as profit gained without effort, which means that only the dividends paid on these shares is liable for zakah at the rate of 10%.

Top


How to calculate zakah?

Q. I feel confused concerning the calculation of my zakah, and would appreciate your help in providing me with simple guidance. I have a house in Mumbai where the rent goes into my bank account there. I have a building in Bangalore, and the rent is paid to my father for my parents' living expenses. I also have there 3 plots of land which earn nothing, but I will be building a house on one and use the other two to meet the building costs. I earn a salary from my job here in Saudi Arabia, and I have some savings in my bank account.

A. We first take out of the reckoning the income you receive from the property in Bangalore, as that goes to your parents for their living expenses. That income is not liable to zakah. However, if the situation changes and the rent comes to you, totally or partially, then the net amount you receive has to be included in your Zakah liability. The plots of land you possess need to be tackled separately. You should identify which plot you allocate for building your house. This is exempt from zakah, if you intend to live in that house eventually.

The other two plots should be treated as a commercial commodity, because they are intended for re-sale. On your zakah date, you should obtain a valuation of these plots and pay zakah on their value at the rate of 2.5%. The net income from your rented house in Mumbai is liable to zakah. This means that you deduct from the rent all the expenses you have to pay, such as maintenance costs, agent's fees, local taxes, etc. What is left after that is liable to zakah. The savings in the Australian bank are also liable for zakah and zakah must be paid on both the deposits and the net income you receive.

If your salary is just about right to meet your living expenses, with your family, then no zakah is payable on that. If it pays your living expenses and leaves you some savings each month, then what is left after meeting your expenses is liable to zakah. When your zakah is due, you include such savings in your calculation of your zakah liability, even though such savings come to you the day before your zakah is due. This means that when you calculate your zakah on your zakah date, you should add all you have in your bank accounts, current savings, as well as the value of the lands you own and the rent you receive. You make your calculation of your zakah liability on the total amount of all these together.

Top


Zakah on Buildings and Land Plots

Q. Could you please let me know which of these items are liable to zakah? I may point out that some of these items are registered in my name while others are in my wife's name- A rented-out residential apartment building; residential plots bought with the intention of constructing houses, flats let out for sale; plots intended to be given to one's children as gifts, where only half of the purchase price is paid and the remainder due for payment within a year. Could zakah be calculated on the basis of the Gregorian rather than the lunar year?

A. The land on which a person built his house is not liable to zakah, nor is the house if he is using it for his family’s living. The land which is retained for re-sale is a commercial commodity, and it is liable to zakah. The liability is 2.5% of its market value on the zakah date. The original price is not considered in this case. Suppose that one paid Rs 100,000 for the land, and kept it for several years, during which it appreciates in value, the zakah payable each year is the market value that year. This means that after two years it may be worth Rs 200,000, and after three years its value may rise to Rs 300,000. Whatever the value that day is the amount on which one is liable to pay zakah.

Let me clear first the point of registration. A man and his wife have separate liabilities to zakah. Each is treated as an individual to whom Islamic duties apply in his or her own right. So each of them has to be an owner of something over and above the threshold of zakah in order to be liable to pay any zakah. That threshold is equivalent to the value of 85 grams of gold. If the wife owns the apartment, then she is the one to pay zakah for it. If the husband is the owner and he merely registered it in his wife’s name for convenience, then the liability is his. He is clearly liable to pay zakah, as he owns all these properties. The other point is that of the Gregorian year. Zakah is calculated on the basis of the lunar year, which has been standard in the Muslim world for more than 13 centuries. Only when the colonial powers occupied our land and imposed their laws and habits, we adopted the Gregorian calendar. It is not appropriate for zakah calculation. Therefore, when you have determined your zakah date, make sure that you know the date in the lunar year and pay your zakah at the same time every year. The apartment building which is let out is liable to zakah. What is payable is the net income it generates. This is the rental after deducting any expenses incurred for the maintenance and administration of the building. Suppose the building is a very large one and you employ one or two people to manage it, then their salaries count as part of the expenses, provided that they work on this task full time. If they have other duties, then the portion of their salaries that is related to this building may be deducted from the rental. If you have property tax to pay, that is also exempt.

The plots of land bought for constructing houses are liable to zakah, because the whole project is an investment one. I realize that some people told the reader that as the plots now stand, they are not liable to zakah, but the basis of that opinion is faulty. These plots are bought for investment, and while no construction work is going on, they are treated as a commercial venture. If the owner receives an offer which gives him a tidy profit, he will seriously consider it, and he may very well sell them to buy some other plots where he constructs buildings, or may buy other types of property. As such they are treated as commercial commodities, and they are liable to zakah. However, the value which should be considered in assessing the zakah liability here is the market value on the zakah date, not the purchase price. The plots bought for the children are more problematic. While they are retained by the father, they belong to him, regardless of his intention, because he may change his mind at any time. As such they are liable to zakah. However, if he makes the gift now, and makes each one of his children the owner of that plot, he is no longer responsible for their zakah.

Each one of his children will have to consider how he or she treats the plot of land. If they want to construct a house for their own living, then the plot is exempt from zakah. If his child will retain it as a form of investment, it is liable to zakah together with that child’s other property, provided that he or she is a zakah payer. What makes the child a zakah payer is owning more than the threshold of zakah. The fact that only half the price of these last plots has been paid does not affect the question, because when the reader calculates his zakah liability, he will deduct what he owes anyway. This means that only the portion paid is included in the calculation.

Top


Zakah on Savings

Q. I have been saving money for the last several years in order to buy a house. I have been paying zakah every year on my savings. As this process will take me several more years, and in the light of the fact that Islam considers having a house for oneself and one's family as a necessity, would it be permissible if one treats such savings for this purpose as exempt from zakah? I prefer not to have a mortgage, which I could do now to buy the house. If I arrange a mortgage, I would be using my savings and would no longer pay zakah on them. Please advise.

A. If you continue to hold cash savings, they remain liable to zakah every year, even though they are ear-marked for a definite purpose. To start with, such savings are ready money which can be used for any purpose at any time. Although you plan to use them for buying a house, there is nothing to stop you from using them for buying a car or organizing a business. But this is not the main point. Since your savings are liquid money, they are liable to zakah.

Nothing can be argued about that.Once you use such money for any purpose, the situation becomes different and it should be looked at in the light of the new circumstances. So if you decide to invest your money in a manufacturing business, and you use the money to buy the machinery needed, or the land where you will have your business, or the vehicles to transport your products to your clients or distribution outlets, then that money becomes exempt from zakah. Islam does not like savings to be kept idle, even though they may be earmarked for a definite purpose. The Prophet advised against that saying that money should not be left idle, lest it should be “eaten up by zakah.” What he meant was that if money is saved, without investment, then paying zakah for it year after year would be certain to make it disappear. While the rate of zakah at 2.5 percent a year, would not literally eat up any savings, the Prophet was actually referring to its progressive decrease in quantity and value. Buying a house for one’s family is a very important thing.

In the West, people resort to having a mortgage. When Muslims living in the West faced this problem, they referred to scholars in the Muslim world, who frequently were unable to give a straightforward ruling because they were not familiar with the system. Scholars who have studied the question closely have been able to give a ruling that it is permissible to take out a mortgage to facilitate the purchase of a house. That is a loan which gives both the borrower and the lender a real benefit. Moreover, the benefit to the borrower is immediate, right from the moment the money is advanced and the purchase is made.

He owns the house and gets all the profit made on any resale at any time. Indeed the benefit to the borrower is far greater than that of the lender.

Top


Zakah on Lettings and Land

Q. Someone has a residential building which he lets out. He also has several plots, some with buildings and some unbuilt. He intends to construct apartments on these for letting. He has been paying zakah on the purchase value of these plots. Some people have suggested to him that since they are intended for building to generate income, they are not taxable. Moreover, he bought four pieces of land to gift to his four children. He calculates his zakah on the basis of the Gregorian year. Is this acceptable? Which of these properties is liable to zakah?

A. The normal period for the calculation of zakah is the lunar year, which is 11 days shorter than the Gregorian year. It is true that these days, with all transactions done on the basis of the Gregorian year, it is difficult to maintain a separate accounting date for zakah. But this is not impossible. It only takes a little extra effort, whether a person has a large business which employs accountants, or he does his own accounts. Therefore, it is advisable to make every effort to ensure that zakah is calculated on the proper zakah date, using the lunar year.

Most people calculate their zakah liability in Ramadan, to ensure that they receive the extra reward for good deeds done in that blessed month. While this is appropriate for a person with a small zakah liability, rich people may pay out their zakah by advance instalments, on a regular basis, then in Ramadan, or on their zakah date, they calculate their total zakah liability and pay out the remaining balance. In this way, they ensure that they will help the poor throughout the year, and get the benefit of extra reward in Ramadan. It is necessary to emphasize that the earlier payments should be advance payment, out of zakah for the current year, not the zakah already due. Whatever zakah is due should be paid out on its due date, and not delayed.

As for this reader’s zakah liability, he seems well-aware of it.

1) The residential building he lets out: zakah is payable in this case on the net income of the building. He should deduct from the rent he receives any expenses he incurs in maintaining the building, such as property tax, services provided, administration costs, including any accounting or wages for cleaners or attendants, etc. He pays his zakah on the net income, at the rate of 2.5 percent. The same applies to the other buildings he has.

2) The unbuilt plots of land. These have been bought for investment, with the intention of building houses for rent. Although they may not bring any income at present, yet it is possible to use these in different ways to get an income. Therefore, they are liable to zakah at the market value on the zakah date, not the purchase price. The reader should, on his zakah date, estimate the value of these plots of land and pay zakah on the basis of that value. We have to consider here that although the intention is to build up these plots, this may take several years. The owner may not mind that, if he has sufficient income from other sources while the value of the land increases.

To say that they are not liable for Zakah until they have started to generate an income can easily become a means for zakah evasion. When the building and letting start, they are treated differently.

3) The four plots bought for the four children. If these remain in the father’s hand, they are also liable to zakah each year at the market value on the zakah date in that year. On the other hand, if the father actually gives these lands to his children and they become the owners, then each is treated according to the intention of its owner. If it is held for investment, then it is liable for zakah every year. If it is intended for the owner’s own use to build a house for his own residence, then it is exempt from zakah.

Top


Zakah on Business and Investment

Q. I realize that when a person runs a business, he pays zakah on the income he receives from it. He does not pay zakah for the value of his factory, his lorry, machinery, etc. Now if one invests some money in an Islamic bank, should he pay zakah only on the income he receives from that investment?

A. What the reader says about exemptions from zakah is largely correct. A manufacturer does not pay zakah on the value of his factory, machinery or other means of production. A property owner does not pay zakah on the value of a building he rents out, but only on the rent he receives. There are many other examples. However, it is not true to say that the value of the business is wholly exempt from zakah. A trader does not pay zakah on the value of his shop, but he pays it for the merchandise he keeps in stock. On his zakah date, he should calculate the value of all the goods he has in stock and pay zakah for these. Similarly a shares owner pays on the value of his shares on the market on the day when his zakah is due.

There are two different views on how to pay zakah on investment in profit-and-loss-sharing accounts in Islamic banks and in shares and stocks. One view equates it with commercial merchandise, saying that zakah is due on the value of the investment and its profits at the rate of 2.5 percent. Another view says that zakah is payable on the profit only at the rate of 10 percent, equating it with zakah on land produce if the land is irrigated wholly by rain water, without the need for any effort. I find the first view closer to the spirit of the zakah system.

Top


Sending Zakah Home

Q. Is it permissible for me to send my zakah back home to a relative who will see to it that it goes to our poor relatives and neighbours? Can this relative decide to whom to pay it? Can he or she pay such zakah for the marriage of girls in the family living in poverty?

A. It is always better to spend zakah in the community where one lives, so that the community will benefit by the prosperity of its members. However, where communities are generally well off, and a person comes from a much poorer community, then it is permissible to send one’s zakah and other donations back home to alleviate the poverty of his immediate relatives and neighbours.

Top


Zakah for Poor Relatives

Q. Is it permissible to pay zakah to relatives, including brothers and sisters? How much zakah should a person pay if he has funds amounting to 170,000 rupees, a plot of land worth 200,000, which he intends to sell?

A. Paying zakah to relatives who are poor is not only permissible, but also preferable. It counts as a double act of kindness. However, zakah may not be paid to poor relatives who are entitled to be supported by the zakah payer, such as his parents, wife and children. Since one is required to support them when they are poor, one may not pay them any zakah because he would be paying it to himself.

Zakah is normally calculated at the rate of 2.5 percent, except for special types of assets. So this person pays a total of Rs 9250 : 4250 for his savings and 5000 for the land, if its value on the day of his zakah payment is still the same. If it has appreciated, his zakah goes up.

Top



Home News from the Islamic World Community Roundup Editorial Readers Comments Opinion Insights Investigation Understanding Quran Hadith Features Book Review Ramadan Islamic Reformation Our Dialogue Children's Corner From Darkness to Light Matrimonial Feedback Subscription Islamic Links Calendar Convertor Contact Us Home

Al-Nasr Exports   
Preserve Flowers