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Question:
A person has invested a sum of £500,000 in shares with view that this sum would be found useful in old age. This investment generates an annual income of about £25,000, which is used to make ends meet.
Zakat is paid on the investment of £500,000 at the rate of 2.5% comes to £12,500 per annum and is to continually paid each year; hence the invested sum will continually erode and in a few years time will be continually reduced and will not be able to support the investor when needed in old age.
According to a hadith, our Prophet (SAWS) has prayed to be saved from hunger and faqr. Based on this hadith, some schools of thought have decreed that the investment is to be treated as an agricultural product (khiraj) and Zakat is to be based on the income accrued at 10%.
According to this school of thought no Zakat is payable on jewellery and gold which is kept for old age, others say to invest in diamonds, on which there is no Zakat payable. Is the above assumption correct?
Answer:
There is a difference between shares meant for sale and the ones meant for investment. The first type of shares are to be treated as commodities for sale on which Zakat is payable. The second type of shares is to be treated like buying a house to rent for deriving some income. In the case in discussion, all the income of the person including the annual income derived from the shares would only be liable for Zakat if it reaches the Nisab after deducting all expenses.
To treat is as an agricultural product is a novel idea which is enclosed by some present scholars. The issue of shares is a new type of transmission, which was not known in the olden times. Hence no clear answer was provided by the four Imams. It has been a matter of Ijtihad in our time. Most of the jurists presently treat them like nay commercial asset meant for sale. In case the person decides to sell the shares, he is obliged to add this money to its total savings and pay Zakat on it if it reaches the Nisab.
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The Quran |
Chapter: Al-Haqqah (69)
Ayat(verse): 13 |
| 13 . And when the trumpet shall sound one blast |
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