Question Summary:
Is Zakat due on shares in a housing scheme, RSP’s, RRSP’s, and stocks? Question Detail:
If someone is saving money to buy a house using Islamic Financing for example If someone purchase shares in ISNA Housing (http://www.ansarfinancial.com/) and buying shares for number of years with only sole intention to buy a house and these shares cannot cash out easily (e.g. it might take 6 months to 1 year to cash out just in case if someone circumstances change and, they need the money for some other need or they don’t want to buy the house anymore for what ever reason it may be). One more thing ISNA also gives dividend every year that can very between 3 to 7 percent.
Now do one have to pay zakat on the total value of shares that passed one complete year ? If someone is getting 3% dividend every year and pay 2.5 % on zakat than that person is only gaining 0.5 percent of halal income from his savings that he is collecting only for his house. The point here that I want to make if you own a house and living int that house as your primary residence you don't pay zakat on that, but what about if you are saving to buy your first house as your primary residence will it not be same thing (my assumption here is the 100 % sole intention for this savings is for buying first house as primary residence).
Also I need to ask about RSP & RRSP. The one is given by your Employer it is called RSP (You cannot cash it until your retirement) and 2nd is Self-directed (RRSP) that people take at their own choice. There are mainly 3 reasons people take the RRSP
1. The retirement RSP+Govt. Pension is not sufficient to cover your living expense at retirement. Therefore people take this as a supplement on top of RSP+Govt. Pension they received.
2. To save taxes (for example if you make 10,000 $ per year, you pay taxes on 10,000$. However if you contributed 2,000 $ towards an RRSP account than you just pay taxes on 8,000$ only.)
3. Take RRSP to pay towards the down payment of your first house purchase. Maximum you can borrow from you RRSP is 25,000$ each person (husband+wife) that makes it 50,000$ in total can be taken out from RRSP to pay for the down payment of your first house purchase. This 50,000$ has to be pay back to your RRSP in about 15-20 years. So there are people who take the RRSP for sole intention to pay for the down payment for the first house that they are planning to buy using sharia compliant housing. So they will be getting financing from Sharia compliant + from RRSP. So sole intention here for RRSP is to buy house. Once house is bought from this RRSP now that intention is no more valid so post buying the house now the intention is only for retirement savings. Does one have to pay zakat on the RRSP amount that is saving only for buying house?
Stocks:
If someone is getting company stocks with every pay check and the sole intention of saving for the stocks is to buy the house do one have to pay zakat on that stock money ?
I don't care about my theory here, if Sharia says I have to pay than I will pay, bowing to the command of Allah and the Sunnah of our beloved Prophet (S.A.W) is more value to me than anything in this universe.
Answer :
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Before discussing the ruling on paying Zakat on RSP, RRSP's and stocks, the reader should note that there is a difference of opinion regarding the permissibility of investing in stocks.
The scholars that permit investing in stocks do so under the following specific conditions:
a. The main business of the company is lawful.
b. The company has some illiquid assets such as buildings, machinery, inventory of goods, etc. If a company only has liquid assets then its shares may only be sold and purchased at face value.
c. The shareholder should voice his disapproval of the company's dealings in interest which is ideally done at the annual general meeting (AGM). This is because many companies in spite of their main business being lawful usually take out interest based loans or keep a portion of their funds in interest bearing accounts.
d. The proportion of the stock dividend (if any) that represents the company's earnings from interest should be given in sadaqah without any intention of reward.
The employee should carefully study which funds meet the above criteria before investing any money in stocks, the RSP or RRSP plan. Care should also be taken that no fixed income products such (Guaranteed Investment Certificates, term deposits, etc.) are included in one's plan as they are impermissible.
Keeping the above in mind, Zakat is due on the shares of the housing scheme, the RSP, the RRSP (both are voluntary retirement plans) and stocks regardless of the fact that you are saving this money to buy a house.
This is as long as your total wealth (assets on which Zakat is applicable after subtracting debts) reaches the amount of nisab, and you have had this amount for one lunar year. [i] [ii] [iii] [iv] [v] [vi] [vii] [viii]
Sohail ibn Arif,
Student Darul Iftaa
Chicago, USA
Checked and Approved by,
Mufti Ebrahim Desai.
فتاوى عثماني ٢/ ٥٨ مكتبة معارف القران كراتشي [i]
إسلام أور جديد معيشت وتجارت - مفتي محمد تقي عثماني ص. ٨٦ - ٨٩ مكتبة معارف القران [ii]
[iii] Turner, John A. Pay at Risk: Compensation and Employment Risk in the United States and Canada. Pg. 134. W.E. Upjohn Institute of Employment Research, 2001. Print.
[iv] https://www.bmo.com/pdf/Understanding_RSPs_E.pdf
[v] http://www.icicibank.ca/faqs/rsp.htm#1
[vi] http://goplan.ca/what-we-do/rrsp-and-rrif/
فتاوى عثماني ٢/ ٥٦ مكتبة معارف القران كراتشي [vii]
المرجع السابق ٢/ ٧١ [viii]
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