Zakat Question: Ruling for paying Zakat on products and stock

Everyday Islamic Finance Personal and Family Finance
#1

Assalamu Alaikum

Questions pertaining to paying Zakat as a business:

  1. Paying zakat on money in bank - Self explanatory

  2. How is Zakat paid on physical stock you have in your possession? The most common opinion that has been mentioned to me is that is paid on retail price of the product. However is this just the stock that you have had for over a year?

I have been told by others that 1 year must pass of me taking possession of the stock for Zakat to be due on it. So for example if I had 10,000 apples on the 1st of May 2019 and had 20,000 on the 1st of May 2020 then would I pay Zakat on 20,000 apples or 10,000 apples?

  1. How is Zakat paid on stock on the way to me, i.e. in transit? On the the retail value or the cost price of the stock or not due until I have had possession for a year?

  2. How is Zakat paid on stock that you have commissioned to be produced or put a deposit down on? Is it again paid on the retail price once you receive it or is it paid on the cost of the product or do you just pay zakat on the money you have paid for the deposit or not due until I have had possession for a year?

#2

  1. Zakat on money in bank - straightforward - but you can deduct monthly upcoming and due bills from this amount.

  2. NZF (and IFG) adopt a snapshot approach to the zakat anniversary. That means that every year you take a snapshot for that day and don’t worry about whether each asset in your possession has actually been with you for that whole year. So if you have 20,000 apples on your zakat day, that’s what you pay 2.5% on.

  3. stock on its way to you should be part of your zakatable assets. So you pay zakat on it. This is as its very likely to arrive and become part of your estate imminently.

  4. Zakat on products you have commissioned. If these are not in your possession/ownership yet, my view would be that you do not have to pay zakat on these. To the extent that you DO own the unfinished goods - then you should take as their value what you think you’d get for them as of your zakat date.

But defer to the muftis on this, particularly on (4).

#3

Thanks for the response and are IFG of the opinion that the stock is valued at the retail price and not the buy price?

#4

Assalaamu alaykum,

  1. I concur with Ibrahim. Zakat is due on all cash one has.

  2. I concur with Ibrahim, that is our view that its a snapshot and it is based on the Hanafi understanding as well as being easier to calculate for many people.

  3. I concur with Ibrahim, stock in transit is also Zakatable.

  4. In regard to question 4, if it is stock which needs manufacturing, Zakat should be paid on the current value in the development phase it is in. If you cannot ascertain that, you can pay on an estimated value you feel reflects its current worth. If you cannot estimate, you can go back to the cost price and use that.

In terms of stock you have out a deposit down, is the transaction made? Has ownership been realised for you?