Zakah on rented property.

Mu' meneen Brothers and Sisters,

As Salaam Aleikum wa Rahmatullahi wa Barakatuh. (May Allah's Peace, Mercy and Blessings be upon all of you)

 

One of our brothers/sisters has asked this question:

What i would like to ask you is the following –

Suppose i buy a flat for 25 lakhs and i pay zakah on it for the first year.After that every year should i pay zakah on the whole amount or just on the rent i receive from it , because if every year i have to pay zakah on the price of the flat it is hardly an asset , cos the rent we receive from it per year will be lesser than the zakah we have to pay on it. I have asked the same question on ISLAMONLINE and the reply was that i had to pay on the whole amount just once and after that on the rent. I was surprised when i read from your site in the other way.If things are like this then we muslims better not invest in anything !!

 

(There may be some grammatical and spelling errors in the above statement. The forum does not change anything from questions, comments and statements received from our readers for circulation in confidentiality.)

 

Answer:

 

Zakah on rented property

In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is none worthy of worship but Allah Alone, and we bear witness that Muhammad (saws) is His slave-servant and the seal of His Messengers.

 

‘Zakah’ is annually liable from every believer (man, woman, or child) whose net excess assets are above the prescribed ‘nisaab’ and have been in their possession for a period of one full calendar year.

 

The rent one receives from one’s invested property is absolutely immaterial when determining the annual ‘zakah’; for ‘zakah’ is based on the net excess assets of each believer, not on one’s annual income.

 

If you have bought the flat for 25-lakhs, you would indeed be liable to pay ‘zakah’ on the market value of the flat at the end of EACH calendar year at the rate of 2.50%.... absolutely regardless of whether you receive any rent or not, or whether the rent received is more or less than the amount of the liable ‘zakah’.

 

Your Question: If things are like this then we muslims better not invest in anything !!

Respected sister, lets assume that a believer has a savings of 25-lakhs cash and he/she chooses not to invest that amount into anything.  That person would still be liable at the end of each calendar year to pay ‘zakah’ on their savings at the rate of 2.50%.

 

Thus, assuming that the person does not invest his/her 25-lakhs cash, the ‘zakah’ of one whose total net excess asset is 25-lakhs cash this year for the next ten years on his reducing asset would be:

            

 

Total Cash

Zakah

Year-1

2,500,000.00

62,500.00

Year-2

2,437,500.00

60,937.50

Year-3

2,376,562.50

59,414.06

Year-4

2,317,148.44

57,928.71

Year-5

2,259,219.73

56,480.49

Year-6

2,202,739.23

55,068.48

Year-7

2,147,670.75

53,691.77

Year-8

2,093,978.98

52,349.47

Year-9

2,041,629.51

51,040.74

Year-10

1,990,588.77

49,764.72

 

 

That is precisely why the Messenger of Allah (saws) guided the believers to invest and trade with their assets, otherwise the annual ‘zakah’ would deplete their assets over time.

 

Amr ibn Shuaib reported from his father from Abdullah ibn Amr that the Messenger of Allah (saws) said: "One who becomes the guardian of an orphan with property must trade on his behalf and not leave it passive in order to avoid depletion of the property by ‘zakah’."

Related by Muslim.

 

Thus it would only be prudence that one who has a savings should invest or trade with their assets in a product which would give them annual returns which would at least cover their annual ‘zakah’ dues.

 

Respected Sister, we reiterate again, the rent one receives from one’s invested property is absolutely immaterial when determining the annual ‘zakah’; for the annual ‘zakah’ is based on the net excess assets of each believer, not on one’s annual income.

 

Whatever written of Truth and benefit is only due to Allah’s Assistance and Guidance, and whatever of error is of me alone.  Allah Alone Knows Best and He is the Only Source of Strength.

 

Your brother and well wisher in Islam,

 

 

Burhan

 

 

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