How Should Business Inventory Be Counted for Zakat?

Answered by Shaykh Muhammad Carr

Question

I run a small business selling products on Amazon and am seeking guidance on how to calculate zakat for my merchandise and overall business situation.

Currently, I have an existing product listed on Amazon, and additional inventory is on its way from China. I have only made a partial payment for this incoming stock. For zakat purposes, should I include the full value of this inventory in my calculation, or only the amount I have already paid?

Answer

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

Allah says,

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

For zakat purposes, you should include the full value of the inventory as you have ownership and constructive possession of the goods. If you only have ownership and no possession, then zakat is compulsory, but it only has to be dispensed after taking possession. [See: Bajuri, Hashiya]

The outstanding amount does not impact the Zakat calculation. The outstanding liability does not absolve you of the Zakat obligation either.

Zakat Is Based on the Present Possession of Wealth

The obligation of zakat is tied to the actual wealth (i.e., in rem). However, it is still permissible to pay their zakat from another source. Once a lunar year passes, the recipients become entitled to their share of the zakat. For instance, if someone possesses 200 silver dinars (coins) and neglects to pay zakat for several years, they are only obligated to pay for one year. [Misri, Umdat al-Salik] 

Liabilities Do Not Prevent Zakat

Taha Hamadi states:

“If a person possesses the minimum zakatable amount while also having an equivalent debt, he is still required to pay zakat on the amount in his possession. This is due to the generality of the evidence obligating zakat, as well as the fact that he owns the minimum zakatable (nisab) amount and has the ability to manage it.” [See: Hamadi, Fath al-Wahhab]

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.