Fatwa #1463112 October 2006United Arab Emirates
I go by the mid of Ramadhan as my year end for Zakat purposes. I bought a house on Islamic Finance. I have already paid 10% of the price as a booking deposit. I am expected to pay another 12% by end of December 2006.
Question
First Case:
I go by the mid of Ramadhan as my year end for Zakat purposes. I bought a house on Islamic Finance. I have already paid 10% of the price as a booking deposit. I am expected to pay another 12% by end of December 2006. Note that all papers were signed already so I am committed to this property.
Q1.1) This 12% is still with me but I have committed it to this property. Please advise if Zakat is payable on this sum.
Q1.2) The property is under construction and will be ready in 2 years (Insha Allah). I am buying it as an investment with the intention to sell it in the future for a profit. Is there a Zakat on the value of the property or my equity in the property (since I bought it through a bank)? Should I pay Zakat now or when I sell?
Second Case:
I bought another property that is already constructed as an investment using Islamic mortgage. I am intending to rent it out in December 2006. Please note that the mortgage term is 25 years and I am paying installments of AED9000 per month.
Q2.1) Is there a Zakat on the property value or on the rent? If so, how to calculate it? Can I subtract the debt amount before calculating Zakat?
Q2.2) Since I go by the mid of Ramadhan as my year end for Zakat purposes but I will rent the property two months from now, should I pay Zakat on this rent now or next year?
Third Case:
Q3) I took an Islamic loan and invested it in a friend’s company (got 5% share in the company in exchange). I am paying it back on 6 years (72 installments). Should I pay Zakaat on this loan?
Jazaka Allah Khair.
Answer
Assalamu Alaikum Warahmatullah
Brother/Sister in Islam
1) Zakat is not payable on the 12%.
2) (a) The property will be regarded as stock in trade and Zakat will be paid according to the market value of the property. The debt owed for the property will be deducted and the Zakat will be paid on the remaining amount. (b) Zakat will be payable on the rentals received. The amount awed for 1 year only will be regarded as a liability and excluded from being Zakatable. If the liability of one year on the property is equivalent or more than the rentals received, then there is no Zakat on the rentals received from that.
2.1) Refer to 2b.
2.2) the rentals will fall in the category of next years Zakat.
3) There is no Zakat on the loan.
And Allah Knows Best
Mufti Ebrahim Desai
Please Note: Listen to live discourses and advices given by Mufti Ebrahim Desai throughout this Ramadhan streaming on WWW.RADIORAMADHANCROYDON.COM Every alternate day after Fajr. 5:30am and after Taraweeh at 10:15pm. Also 10:00am everyday, Q/A 2:00pm and after Asr Majlis 5:15pm. All times are according to British standard times.