Zakaat on shares of a company

DWQA QuestionsCategory: zakaatZakaat on shares of a company
JonSnow Staff asked 3 years ago

I would like some information about Zakaat on shares of a company. My mom inherited some shares when she got married. Today’s value of all the shares are about 3 million rupees but the dividend received in a year is very less than Rs 100 000. She uses the dividend for her personal use mostly on medicine & some clothes as dad can’t afford for her expenses. She removes Zakaat only on her money at Bank and on the money received as dividends. She has never removed Zakaat on the shares since around 25 years, always on her money in the bank which is today around Rs 200 000. Does she have to remove Zakaat on the value of the shares too? Does she have to remove 2.5 % on Rs 3 million = Rs 75 000? If yes and if she removes Rs 75 000 each year, nothing will be left in her money (Bank Balance). Then after that, what does she do? Sell the shares to pay Zakaat? What to do now?

1 Answers
JonSnow Staff answered 3 years ago

The science of acquitting Zakaat is based on those assets that is fluidly growing. That is why there would be no Zakaat taxable on land, building, machinery,etc. Whereas stock, cash, good debts, jewellery and so on are all zakaat taxable items. The taxable items should minus creditors and loans as at that date. This principle applies to an individual as well as collective ownership like companies. Now the shares of your mother represent a specific percentage of ownership in that particular company. In calculation of zakaat, one has to read the balance sheet of the company and earmark the zakaat taxable items (see on the complete guide of zakaat) and add all of them. Then the liabilities mentioned would be subtracted from the Assets. Technically, we are looking for the net assets available as at that date. The amount left is the taxable amount for the whole company. So to calculate the zakaat of your mother, take the amount of shares that your mother own in that particular company and divide it by the total amount of shareholders that is listed in the company. The fraction left is the ownership ratio of your mother in that particular industry. Take the ratio and multiply it with the Net asset calculated above and you would have the taxable amount for Zakaat. Now the Zakaat would be only 2.5% of that amount per lunar annum. You have noted that there is no Zakaat on the dividend unless the money is banked and found in the closing balance as at year ending or Zakaat date. An approximate calculation of Zakaat for the last 25 years may be rounded up and slowly she may acquit the Zakaat due. Important to know that only volatile ordinary shares dividend are halaal compliant. Fixed preference or ordinary, debentures, bonds and bills are all non shariat compliant. Should you require for help, do not hesitate.