How Does Buying and Selling Properties for Business Within a Year Affect Zakat Calculation?

Answered by Shaykh Muhammad Carr

Question

I am in the business of buying, fixing, and selling properties for profit. I understand that zakat is due on the property’s market value if held for one full zakat year. However, what if I sell and buy multiple properties within a year?

For example, if I buy a property, sell it after six months, and then, a month later, calculate my zakat while the proceeds are still in my account, but I am using those proceeds to purchase another property. How does this impact the zakat calculation?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

Allah (Most High) says,

“Accept charity offerings from their wealth cleansing and making them grow thereby to full purity in faith and deed.” [Quran, 9:103].

If the proceeds from the sale equal the minimum taxable amount (nisab) and are in the same currency in which the property (or merchandise) is valued, then the proceeds will be included in your current zakat calculation. This is because the fluctuation between liquid and solid forms of merchandise, under the above conditions, does not affect the lunar year. [See: Shirbini, Mughni al-Muhtaj]

How Buying and Selling Affect the Lunar Year

Similarly, if the property is exchanged for another, the lunar year does not end, and it should be included in the current zakat calculation. However, if the property is sold for less than the nisab and another property is purchased with that amount, a new lunar year begins for the new property.

Mode of Payment

The method of payment also affects your zakat calculations. It is essential to distinguish between payments made with a specific, tangible asset and payments considered liabilities or debts.

Payment with a specific, tangible asset refers to an exact item or property that is physically present. In this case, the lunar year for the funds used to make the payment continues and is included in your zakat calculation.

Payment of liability refers to an obligation or liability not tied to a specific, tangible asset at the time of the agreement, but is a debt that can be settled with any form of payment. Liability exists in the “seat of responsibility” and is not tied to any specific asset. Payment in this context is not made with a specific physical item but rather a generalized monetary value or obligation. When the payment is structured as such, the lunar year of the monies used ends, and a new lunar year begins with the acquisition of the property. [See Khatib, Mughni al-Muhtaj]

Zakat is only due when the property remains in your possession for an entire lunar year. Today, most payments fall into the latter category, which provides zakat relief for property merchants.

Make Your Zakat Do More

If you do owe zakat, I would advise you to consider supporting the Islamic Scholars Fund. Its reach and impact are enormous, and you’d be supporting many scholars and students who make a real difference in the lives and faith of many Muslims worldwide.

Please take a look at the ISF Report.

See also: Zakat: A Comprehensive SeekersGuidance Reader

I pray this is of benefit and that Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.