The Prophet (PBUH) said: "Giving charity wipes away sins just as water extinguishes fire."
Zakat is one of the five pillars of Islam and is obligatory for all Muslims who possess wealth above a certain level.
This article will help you understand the association between Zakah and Property and enlighten you on which properties you have to and don't have to pay Zakat for.
The answer is both yes and no.
There are properties for which Zakat is due and properties for which Zakat is undue.
Properties for which Zakat is not payable ;
Properties for which Zakat is Payable ;
If an asset or property is purchased to re-sell it, then the entire value of the property will be subjected to Zakath.
The concept of Musharakah is applied when you own only a percentage of the property. Thus, your payable Zakat amount is due only on the percentage of your property.
If your Property is a Murabaha mortgage, you are liable to pay Zakah for the entire property as, technically, the property is wholly owned by you.
Suppose a land or property is bought with the intention of re-selling, but you decide to invest, then Zakah is due on the approximate sale price of the asset on the Zakah date.
If you purchase a property to rent, you have only to pay Zakah for the rental income and not the property.
Here are some examples to better understand the above situations:
(a) If you intend to resell the house you own.
It doesn't matter how long it takes. It could be 3 months or 3 years. You have to pay Zakat for the
You buy a property at some auction. You intend to improve it and flip it, selling it when you purchase.
(b) If you own a rental property, the zakat should be paid on the rental income.
You rent it out after buying a property that meets the sharia-compliant mortgage. The annual income from the rent is $24,000.
On the zakat date, you have to calculate the zakat, and you have to do it to your rental income:
$20,000 spent on mortgage repayment.
$2,000 for refurbishment costs
You have to pay zakat for the balance amount as well if your zakat date is beyond Nisab (we'll define Nisab below).
For a $10k worth of investment, you have to calculate zakat as below.
Once all dues are settled, you will have an annual income of $600 from your investment. But the total amount is in the bank when calculating the zakat.
So zakat will be on $600 if the overall wealth on zakat date is beyond Nisab.
(c) If you purchased a house intending to resell, but later on, your intention changes. You now want it as a long-term investment; if this happens, the zakat calculation will be different.
You purchased a house intending to resell in 2018. So for around 3 years, the zakat was calculated on the whole amount. This is while you were trying to sell it, just like situation (a).
After the 2021 zakat date and payment, before 2022 due, you have decided to rent it out instead of reselling because it's too complicated otherwise.
In 2022, you will have to pay zakat on your rental income as you did in (b).
Before being obliged to Zakat, a Muslim's minimum amount is known as Nisab. The Nisab value lets a Muslim see whether they can pay Zakat.
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