Abdur Rahman ibn Yusuf Mangera – Simplified Zakat Guidance Shares and Stocks
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Bismillah R. Rahman and Rahim today I want to cover zakat on
stocks and shares. And I think what we have to understand first
what a stock and share is, is that there's a company. And basically
what it's done is that it's allowed people to buy small shares
in their, or their larger shareholders in some companies as
well. But for most of us that are just buying small amount of shares
in the various different companies, as long as the
companies are halal, then how do we give zakat on that. So there
are two things that we have to understand. And one is that if
you're buying and selling stocks, and shares, which we call similar
to day trading, where you're not really in there for the long term,
you're not really checking out the viability of the company in terms
of its long term profitability and growth and so on. But rather, you
just somebody's told you that, oh, this particular oil stock, or this
particular tech stock is about to go up. Because, you know, there's,
there's a lot of hype about something. So all you're there for
is just to ride the large wave. And you're sometimes even doing
day trading. Sometimes this is done over a few weeks, just short
term. In that case, my belief is that the Zakat should be paid on
the entire value of your stock. The reason is that you actually
treating the stocks as a commodity in themselves, which they should
not be because literally literally what you are, is a partner in the
business, however minor, right, but you're treating the stock
itself as an asset of value, right, and a commodity, which is
going up and down. I just like some people treat currencies like
that, which they shouldn't really do. Right. So that's why you
should actually pay on the entire amount because you're not really
looking at the liabilities of the company in terms of their assets
and things like that. So if you have a stock holding shareholding
of maybe 15,000 5000, you will pay Zakat 2.5% on that entire amount.
Plus, I personally have issues with day trading. I'm not saying
it's haram but I see it similar to gambling. Right. But that's a
separate point. I don't want to talk about that right now. The
other type of investor in the stock market is the long term one
generally Warren Buffett style, where they check out the viability
of the company, check it assets, its long term viability, and so
on. And they're waiting for dividends in that case, are they
waiting for slow growth, eventually, there's going to be
gloves, there's going to be stability, they're not as
volatile, right? And, and there's dividends that you receive. So now
let's talk about dividends first, some people some stocks may give
you dividends every six months, or maybe one year in a year. That is
just like I explained in another talk that that's just like income
you're getting. So there is no zakat on that directly on every
penny you receive you just on the Day of yours that God calculation
of the year that your anniversary date whenever that is, if you've
still got some of that money, and just like any other income you
will pay otherwise you don't you want. So it's not tax that source.
Sorry, it's not the cuttable sources we'll say, however,
in terms of the value of your stock, now your stock holding your
shareholding How do you please the curtain is now because you're in
there for the long run you actually a shareholder. So just
like I explained when it comes to running a business, how do you pay
zakat on business, the same kind of laws will apply here, same kind
of rules will apply here. Because if you're in a business, you've
got, for example,
stocks in Adidas, right, or in
another company like Apple or something like that, what you
would really have to do is being a shareholder in the EU, you would
have to see how much of the assets of the business, their holdings,
right, their stock, the liquidity, all of that is acceptable and what
is not acceptable. That's quite a complicated process. To be honest,
you need to have a bit of a financial mind for this. And you
may even have to illicit illicit help for that from your
accountants and pay money for it. Which basically means that you
have to look at the interim reports, their balance sheets, and
all of that to figure out what they have, because liquid assets
that they have will be socketable. Right, for example, any buildings
that they own, that they use as assets to do their work from that
will not be accountable. As I explained in the cake
manufacturing process, I explained the same thing. Now that's a long
process. And especially if you've got like 20 stocks or 40 stocks, I
mean, how you're going to do that. That's why some of their orlimar
they've provided a benchmark figure that you can use. They
generally after taking a survey of the averages of many, many stock
companies as long as these are halal companies, right? Most of
the halal companies we're talking about not things like insurance
companies or banks or * or whatever, they they're
different. They're haram they're not even allowed to buy stocks in
them. Right and also the banks and insurance company they work
separately. This normal companies that do you know, they do a bit of
investment here and there as well. They keep money's in the bank
sometimes as well. There's always going to be a bit of an issue. So
they say that J
Generally you should, if you don't have the time to actually look
through and get the proper figure that 20% is accountable assets,
because the majority of assets will not be accountable
necessarily, most of the holding will be in real estate or real
stock or something like that. So they basically said that use the
40% rule, like according to their survey found that is 40% is
generally going to be enough to cover the countable assets of
companies. So if you have, let's just say for argument's sake
10,000 pounds stock or just say 1000 pounds in shares, stocks. So
that means you will pay zakat on 40% of that, which means 2.5% of
40% of the value, which means on 400 pounds. Of course, if it's
10,000, then you will pay the Gutten 4000 value of it, right?
Obviously, the better way to do it is to check through and figure out
the assets. But if you can't do that, you just pay 40%. Now, that
means you pay this is the equation 2.5% of 40% of the of the 100% of
the company. Right now, if I tell you to do that, one day, I was
actually doing this for somebody, right who had stocks. And
essentially, some of you may know that there's an easier way to do
this 2.5% of 40% of the 100, actually, is very simply 1% of the
total. So simple. Simply put, because 2.5% of 40 and 40% of 100,
that equates to 1% of the total amount. So if you're holding 1000
That means you will pay a cut of 1% that will be your ticket figure
that equates to 2.5% or 40 of it. So how much is what is 1% of 1000
pounds
10 pounds, as far as I understand, and 10. If you've got 10,000
stock, you will take out on that will be
100 pounds, because that's 1%. That's essentially two points,
because let's just just to prove it to you, let's just show you how
it all comes to the same, right? If you've got 1000 pounds, 40% of
it is 400 pounds 140, which is 2.5% is how much of 40 pounds,
or 400 pounds rather
400 pounds 2.5% or 1/40 of it is how much 1010 pounds.
Right? Let's just take it even easier. Let's say your stock is
worth 100 pounds 40%
is 40% of that would be 40 pounds. What's 1/40 of that is one pound
for 140. F is the cat cat is the cat that's 2.5%. So that's why
from the 100 rather than first say 40% And then take 2.5% of that
just from the 100 just say what is 1% of it. So that's very simple.
If you've got assets of 2650 you just take 1% of that. And you pay
zakat on 26 pound 50 pence. Right so that's the simplest way of
doing it. So hopefully that makes life easier with regards to the
stocks and we pay zakat on it just like Allah Hara salam ala moana