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Zakat on Gold While Having Debts

Answered by Ustadh Tabraze Azam
Question: Salam we have 320 grams of gold jewelry but we have long term home loan and car loan which we are paying in instalments. We have also some amount in shares. How can we calculate the zakah?
Answer: Wa alaikum assalam wa rahmatullahi wa barakatuh,
I pray that you are in the best of health and faith, insha’Allah.
You should calculate the sum of your zakatable assets and minus any immediate debts and expenses. You would then pay zakat on the resultant, net amount if you had been in possession of the zakatable minimum (nisab) [see: e-nisab.com] at the start and end of the zakat year.
With regards to long term debts, it is superior to deduct the next, upcoming payment. At most, you can subtract an entire lunar years’ worth of payments, yet not more than that [i.e. the entire debt, if due in multiple years.]
Please see: Zakat: How to Calculate & Whom to Give and: Zakat & Long-Term Debts and: How is Zakat Determined for Stocks?
And Allah alone gives success.
Wassalam,
Tabraze Azam
Checked & Approved by Faraz Rabbani

Zakat on Properties and Reaching Ramadan Owing Fasts

Answered by Ustadh Tabraze Azam
Question: Assalam alaykum,

(1) I have two properties overseas under my name.
I have school debt, cash, and no income.
I live with my husband and he provides for me, as well as my father.
He also has some savings in the bank.
How should I/we calculate the zakat for this year?


(2) I owe 4 days of fasting from last year’s Ramadan due to menses. I was not able to complete them due to various reasons before this year’s Ramadan starts. What is my expiation?

Answer: Wa alaikum assalam wa rahmatullahi wa barakatuh,
I pray that you are in the best of health and faith, insha’Allah.
(1) Property is not zakatable unless it was purchased with a clear intention to sell. You would pay zakat if you are in possession of the zakatable minimum (nisab) above and beyond your immediate needs and debts. Your husband should calculate his zakat separately. Please see: Zakat: How to Calculate & Whom to Give and: Zakat & Long-Term Debts
(2) There is no expiation for delaying a makeup fast until the following Ramadan. Please see: Do I Have To Make Up Missed Fasts Within A Year?
And Allah alone gives success.
Wassalam,
Tabraze Azam
Checked & Approved by Faraz Rabbani

Paying Zakat vs. Paying Off a Debt

Answered by Shaykh Faraz A. Khan

Question: I have some jewellery which meets the nisab of zakat. However, I also have a credit line loan. Last year, when I calculated the zakat on jewelry it came out to be around $800.

 

My credit line loan is $7,000. Am I obligated to give the $800 in zakat or can I pay it towards my loan?

Answer: Assalamu alaikum wa rahmatullah,

I pray this finds you in the best of health and states.

Firstly, keep in mind that for zakat, zakat is not due on all jewelry, but just one’s gold and silver. Also, to see if you meet nisab, you need to add the value of the gold and silver to your cash (as well as trade assets if you own a business).

With respect to your credit line loan, if this is a short-term debt (i.e., due within a year), then you would deduct that entire amount before seeing if you have nisab or not.

If it is a long-term debt (due after one year), then you would deduct the upcoming monthly installment, or at most up to one year. Aside from that amount, you would see if the rest met nisab or not to see if you owe zakat.

Please see related answers on SeekersGuidance, such as:

Zakat & Long-Term Debts

How to Calculate Zakat When Paying or Receiving Loan Payments

Paying Zakat on Gold, Loans, and Gifts

Zakat Questions: Resetting Start Date, Miscalculations, and Debt Deduction

[Kasani, Bada`i al-Sana`i; Ibn Abidin, Radd al-Muhtar]

And Allah knows best.
wassalam
Faraz

Checked & Approved by Faraz Rabbani

Zakat & Long-Term Debts

Answered by Sidi Waseem Hussain

Question: I have a considerable sum of gold. Unfortunately, I was not earning enough to be able to pay zakat on it. I put aside some of the gold for zakat, and made note of the zakat amounts which I still owed. Once I started earning, I put that money aside to make up for the back-zakat. I also am unable to fast due to a medical condition, so I made note of fidya amounts and also put that aside. I recently donated the above mentioned zakat and fidya, alhamdulillah. But right after I donated, I learned that debts are to be deducted from my zakatable assets. I have a very large student loan debt, and based on Islamic Relief’s zakat calculator, I actually don’t owe any zakat after all. Now that I have already donated, would it be possible for me to view the amount of money I mistakenly donated towards zakat as the fidya which I would owe for missed fasts in the future? My medical condition is such that I will not be able to fast again for the rest of my life.

Answer: Assalamu Alaykum Warahmatullah,

The scholars differentiate between two types of debts:

  • Long-term debt: Which is a debt repaid on fixed installments for more than a year. Mortgages from studying, buying a house, car and the like would be of this kind.
  • Short-term debt: Which is a debt immediately due within a year.

This differentiation is important when it comes to zakat, since one can only subtract the entire amount if it is a short-term debt.

Long-term debts are not dedcutable, except for the immediate installment.

Consider the following example:

Assume the zakatable-minimum (nisab) is $2000.

One’s zakatable assets amount to &5000.

One has an outstanding mortgage of $50.000 with fixed monthly installments of $500. This would be a long-term debt. As such one can only subtract the upcoming installment of $500, and has to pay zakat on $4500.

A student-loan would be a long-term debt. Hence the entire debt is not deductable.

However, if you have started repaying the debt, then it would be possible to dedcut the upcoming installment.

Considering the above, the money you have donated has in fact been zakat.

Waseem Hussain

Checked & Approved by Faraz Rabbani