Question Summary:
Zakat while in debt

Question Detail:

I bought a house for £145,000£15,000 was lent by my mother£50,000 was lent by my fatherI paid £23,000 towards itI took a loan out for the remainder £57,000Question: My mother has a total of £30,000, if she lent me £15,000 from this 3 weeks before her zakat due date, how does she calculate her zakat. Can she assume the full £30,000 for all years it is lent out and base the 2.5% on this even though she has lent it out?Question: Do I owe zakat given my total debts outweigh the amount I have in my bank account? Assuming for example my monthly debt repayments are £500, and my salary is £2000, technically I don't reach nisab because my total debt is £122,000. 

Answer :

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
1) Your mother must pay zakat on the entire amount for all the years she lends the money to you after receiving the money back. However, she has the option of calculating and giving the zakat before she receives the money.[1]
The method of calculating Zakat from the debt received is that she starts by deducting the zakat owed for the first year. This is deducted as 2.5% from the money received. Then she will calculate the second year’s amount as 2.5% of the remainder. Then the third year’s amount is 2.5% of this remainder and so on.
For example, the debt received in 2016 is £4000, so when calculating the Zakat for the year 2014, she will deduct 2.5% from £4000 which is £100.This is the zakat owing for 2014.
 After deducting this £100 from the £4000, it leaves £3900, which would be used when calculating Zakat for 2015. So the Zakat for 2015 is 2.5% of £3900. She should do this repeatedly for each year.
 
2) In the case of long term debts, you will deduct the yearly payment from your total assets and give zakat on the remainder if the remainder reaches Nisaab.[2]
For example,
Your debt repayments are £500/month. Therefore, your yearly repayment will be £6,000.
Assuming your total assets add up to £20,000 at the end of the year after deducting your essentials, you must give zakat on the £14,000 (£6,000 yearly debt deducted from the total).[3]
And Allah Ta’āla Knows Best
Saad Haque
Student Darul Iftaa
New Jersey, USA 
Checked and Approved by,
Mufti Ebrahim Desai.