Zakat Questions and Answers
Examples: Tahir decided to invest in a company called "Integriti" He bought shares to the value of £1000. When his zakat year elapses he looks at Integriti's accounts and calculates that 70% of their stocks are zakatable. He pays zakat on £700.
Jawad is a speculator who makes his money on buying and selling shares. When his zakat year elapses, he has £100,000 worth of shares in his possession. He pays £2500 in zakat.
I have some shares, how do I calculate what zakat I owe?
Shares are of two types: those purchased by a speculator who trades in shares, and those bought for investment.
If you are a speculator and have bought shares specifically for the purpose of selling them and making a profit, then the entire market value of the shares is subject to zakat since it is considered as stock in trade.
If, on the other hand, you have bought the shares as an investment and to receive dividends, then you first have to calculate the percentage of zakatable assets the company has, and pay zakat on that percentage of the value of your shares. To do this you would have to look at the yearly accounts of the company, and work out what percentage of its assets are stock, raw materials, cash, gold or other zakatable items. Buildings, machinery, vehicles and so on that are essential for the business are not zakatable.