Question Summary:
How should I pay Zakāh on property purchased for business? Question Detail:
I have question regarding zakat on property bought for business. In first scenario can you please guide me, if, for example I have paid my zakat on all of my money on Dec 30 2010, on Jan 2011 I buy an old house for $ 300,000, renovate it in 3 months and sell in 4th month for the amount $350000, do I have to pay zakat right away on all of the money or do I have to wait for a year to pay zakat.
My second scenario is, if I buy land in Jan 2010 for $300,000, demolish and reconstruct the house and the entire process takes 2 and half years. Do I have to pay zakat every year even if I don’t have enough money in my possession? Or do I have to pay zakat as soon as I sell the house for example for $400,000 on all of $400,000. Or do I have to wait for a year to pay zakat. Third question is what if I sell the house after 2 and half year say june 2012 and buy another land in next few months from the money I get by selling the house, do I have to give zakat first or in this case money is exempt from zakat. Is zakat on profit or on actual amount invested? Last question how to keep track of money which is under our possession for entire year, because money comes and go.
Answer :
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
At the outset, it is important to understand the basic concept of calculating Zakāh.
The day an individual becomes owner of Zakātable wealth (gold, silver, cash, or trading merchandise) equivalent to the amount of Nisāb (612.36 grams of silver or its value in cash)[1] is termed as his Zakāh day. In other words, annually all Zakātable wealth in his ownership on that day must be calculated for Zakāh.
If one does not remember when he first became owner of this amount i.e. 612.36 grams of silver or its value, he must apply his discretion and arrive at a conclusion. If he is unable to remember even after applying his discretion, he must stipulate any day as his Zakāh day based on the lunar calendar. Thereafter, on a yearly basis he must calculate all Zakātable wealth in his ownership on that day. [2]
Based on the above-mentioned, hereunder are the answers to your queries:
If your Zakāh day corresponded to Dec. 30th, 2010, then the house purchased on Jan. 2011 and sold after 4 months was not in your ownership on your Zakāh day. Hence, there was no Zakāh due on the value of the house. However, if any amount from the $350,000 you earned through the sale of the house remained in your ownership on your next Zakāh day, Zakāh was due on that amount.
If you purchased the land in Jan. 2010 with the intention of resale and had it in your ownership for 2 ½ years, then Zakāh was due annually on that land based on the market price of the land on your annual Zakāh days.[3]
If you purchased a house with the intention of resale immediately upon selling the previous house, you will only pay Zakāh on the value of the house if it was in your ownership on your annual Zakāh day.
You ask if Zakāh is on profit or actual amount invested. If you have the house in your ownership on your Zakāh day, then the market value of the house on your Zakāh day will be considered. If you have sold the house prior to your Zakāh day, then the cash remaining from the sale will be added to the rest of your cash and Zakāh will be paid on the entire amount remaining in your ownership on your Zakāh day.
You state that it is difficult to calculate Zakāh because money comes and goes. This difficulty is experienced only when one has not stipulated his Zakāh day. If the Zakāh day is stipulated, then Zakāh will be paid on whatever Zakātable assets are in his ownership on that day.
And Allah Ta’āla Knows Best
Abdul Azīm bin Abdur Rahman,
Student Darul Iftaa
U.S.A.
Checked and Approved by,
Mufti Ebrahim Desai.
[2] احسن الفتاوى، ج 4، ص 265، سعيد
[3] وَتُعْتَبَرُ الْقِيمَةُ يَوْمَ الْوُجُوبِ، وَقَالَا يَوْمَ الْأَدَاءِ (رد المحتار، ج 2، ص 286، سعيد)
يُعْتَبَرُ قِيمَتُهَا يَوْمَ الْوُجُوبِ كَمَا فِي مَالِ التِّجَارَةِ (بدائع الصنائع، ج 2، ص 421، دار الكتب العلمية)
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