Question Summary:
Do i have to pay Zakaat while i have debts to pay?

Question Detail:

I want to know about my zakat I will have to pay or no? I took Loan from Islamic bank a year before of 42,000 Aed Aprox (PKR 1,150,000) for housing purpose, now I am paying monthly installments 1160 Aed Aprox(PKR 32,000), I will pay this loan in 4 years (48 installments) and I already paid 13 installments and I have aprox 20,000 Aed in my account, this 20,000 aed is mixture of half loan and half my savings in a year, so I want to know I should pay zakat? If yes then how much I have to pay? And I can pay in this month? Or there is specific month and time to pay zakat? I am waiting your reply.

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh
 
Zakaat will be wajib (compulsory) upon a person who possesses the amount of nisaab, over and above his basic needs and after fulfilling his debts.
If a person had so much debt that if he had to fulfil the debt, he would have a remainder of wealth which is equal to or more than the nisaab, then zakaat will be wajib on the remainder of the wealth.
If the loan is such that it engulfs the whole wealth, or the remainder of the wealth after fulfilling the debt is less than the nisaab, then zakaat will not be wajib.
However, the ruling will be different in the case of long term debts that exceed the time period of one year. In such situations, the amount owed for one year will be calculated, and only that amount will be considered when applying the rules of zakaat. I.e. if the remainder of the wealth were to exceed the nisaab after fulfilling this amount, then zakaat will be wajib; and if this amount engulfs the remainder of the wealth or the remainder of the wealth after fulfilling this amount is less than the nisaab, then zakaat will not be wajib.  
With regards to your specific question, we understand that you received a home loan from an Islamic Bank and you are currently paying monthly instalments.
 
According to Shariah, you will consider one year instalments as a liability when calculating your Zakaat. For example, your yearly instalments are AED 12 000 for this year towards your debt, then you will only calculate that amount as your liability and the remainder AED 30 000 will not be considered. You will consider the funds in your bank account as cash on hand when calculating your Zakaat. The loan amount in your bank account is exempt from Zakaat.
Kindly refer to the following link for more details on Zakaat calculation: http://www.askimam.org/public/question_detail/17114
 
And Allah Ta’āla Knows Best
 
Ismail Desai,
Darul Iftaa
 
Checked and Approved,
Mufti Ebrahim Desai.