Do I have to pay Zakat on my stocks and shares?

zakat on stocks

Do I have to pay Zakat on my stocks and shares?

Answer:

If you own stock in a company (or shares as they are called) then to determine their liability for Zakat you should look at the investment strategy you are using.

  • If you are using them for a long term investment (something you plan to hold for a year or more) thenĀ if they are more than Nisab,
    • A – If the company does not have any assets other than the dividends, then you will pay Zakat on the dividends distributed by those stocks (shares) when paid,
    • B – If the company holds assets (cash, receivables, inventory) then you will pay Zakat on the book value / net asset value as well as the dividends.
  • If you are an active trader, or have an active portfolio in a mutual fund, then you will pay Zakat yearly on the market value of the stock (share) or the portfolio, as well as the dividends.
  • If you sell these stocks (shares) during the year, you will add the amount received from sale to your liquid assets and pay Zakat according to general rules of Zakat.

This is the method prescribed the Fiqh Academy of the OIC and is generally prescribed by most scholars who are specialists in the field. There are other opinions, but we will cover those in a more extensive article.

About Joe Bradford

About Joe Bradford

Joe is a structuring advisor for a major real estate development firm, specializing in Shariah compliant investment vehicles. He runs a financial advisory. He is the founder of Muslim Money Guide and also blogs at joebradford.net.

comments

  1. raed

    i still do not under stand ?
    i do have and hold company stock since at least 5 years and i do not know when i will sell them ? the value is with today market $ 27000. do i need to pay zakat ? ??
    WJAK.
    Raed

    1. User Muslim Money Guide

      Hi Raed, In you case you will pay Zakat on the net asset value (book value) of the stock, meaning 2.5% on the value of the cash, inventory, and receivables together.

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