Abdur Rahman ibn Yusuf Mangera – Simplified Zakat Guidance Shares and Stocks

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