Zakat is an obligatory charity in Islam, applicable not only to gold, silver, cash, and business assets but also to various other forms of wealth. Islamic scholars have extensively discussed the application of zakat on stored goods, financial instruments, and other assets that hold monetary value. It is important to understand how zakat applies to wealth that is accumulated, saved, or invested. Below are detailed discussions on different types of stored wealth and their zakat obligations.
Zakat on Stored Goods
Islamic scholars emphasize that wealth should be circulated in society rather than hoarded for extended periods. If wealth is stored but not utilized productively, it can lead to economic stagnation. Stored goods refer to assets that are not in active use but have significant value, such as expensive fabrics, jewelry, pearls, silk, and rare stones.
Islamic teachings discourage excessive hoarding of wealth and encourage the circulation of assets to promote economic stability and social welfare. If stored goods are acquired with the intention of future trade or investment, zakat must be paid based on their market value at the end of each lunar year. However, if they are purely for personal use, zakat may not be obligatory unless they fall into the category of gold and silver, which are always zakatable.
Conditions for Zakat on Stored Goods
To determine whether zakat applies to stored goods, the following factors should be considered:
- Stored Goods for Trade: If goods are kept with the intention of trade, such as stock in a business, raw materials, or inventory, then zakat is obligatory at a rate of 2.5% of their market value.
- Inherited Stored Goods: If a person inherits valuable assets, the zakat obligation depends on the nature of the goods. If they are gold, silver, or cash-equivalent, zakat is due once the lunar year has passed, provided the amount meets the nisab.
- Luxury and Ornamental Items: Goods such as rare jewelry, decoration pieces, or collectibles that are not used for business are generally exempt from zakat. However, some scholars recommend paying zakat on high-value items as a precautionary measure.
- Consumable Goods: If stored items include consumables such as food, drinks, or household essentials, zakat is not applicable unless they are part of a business inventory.
- Excavated Wealth or Buried Treasure: If a person acquires wealth through excavation, mining, or the discovery of buried treasures, zakat must be paid immediately at a rate of 20% (one-fifth) as per Islamic teachings.
- Wealth Obtained Through Gifts or Windfalls: If a person receives valuable assets as a gift or windfall, zakat is applicable only if the assets remain in their possession for a full lunar year and meet the nisab threshold.
Zakat Calculation for Stored Goods
The Prophet Muhammad (peace be upon him) said: "On stored goods, zakat is to be given based on estimation." (Sahih Hadith)
A person must evaluate the market value of stored assets at the end of each lunar year and pay 2.5% zakat on the total value. This ensures that wealth is not stagnated and continues to benefit society.
Timing for Zakat on Stored Goods
Zakat on stored goods must be paid at the end of each lunar year. The owner should assess the total market value and ensure that the due zakat is paid promptly.
Zakat on Financial Instruments (Bonds, Notes, and Investments)
Zakat also applies to modern financial assets, including cash savings, financial bonds, investment securities, and shares in companies. The principle remains the same: if these assets meet or exceed the nisab and are held for a lunar year, zakat is obligatory.
- Zakat on Bonds and Banknotes: If a person owns financial bonds or banknotes, zakat is calculated based on their monetary value. If these financial instruments appreciate in value, the zakat is based on the current market rate.
- Fixed Property and Rental Income: Properties held for rental purposes are not directly zakatable, but the rental income is subject to zakat if it meets the nisab threshold.
- Fluctuating Assets: If a person’s wealth fluctuates throughout the year, zakat is due on the balance available at the time of zakat calculation.
- Zakat on Stocks and Shares: If an individual owns shares in a company, zakat should be calculated based on the company’s net assets and the shareholder’s ownership percentage.
- If the company’s business is fully compliant with Islamic principles, zakat is payable on the net worth of the company.
- If the company is engaged in non-Islamic activities, such as interest-based financing, then purification of wealth is necessary before paying zakat.
Zakat on Salaries and Wages
In today’s world, many individuals earn their livelihood through fixed salaries or professional services. Understanding zakat obligations on salaries is crucial:
- Salaries and Monthly Income: Zakat is not directly due on salaries as they are earned, but if a person accumulates savings from their salary and it remains untouched for a full lunar year, zakat becomes obligatory on the amount that meets or exceeds the nisab.
- Savings and Investments: If a person saves money from their salary and invests it in a zakatable asset such as gold, silver, or stocks, zakat is due based on the value of those assets.
- End-of-Year Calculation: It is recommended for salaried individuals to calculate their savings and assets at the end of each lunar year to determine the zakat amount accurately.
Zakat is a fundamental pillar of Islam designed to ensure wealth is distributed fairly and that society benefits from financial circulation. Whether it is stored goods, financial instruments, or salaries, the core principle remains the same: if an asset meets the nisab and is held for a lunar year, zakat must be paid at 2.5% of its total value.
Through zakat, wealth is purified, and economic balance is maintained, ensuring that financial resources are not monopolized but rather distributed for the benefit of the less fortunate. By fulfilling this obligation, a believer not only secures their spiritual rewards but also contributes to a more just and equitable society.