Mansoor Danish – Zakah (Zakat) On Mutual Fund Shares

			Salam Alaikum warahmatullahi wabarakatuh there's a question which has been asked with regards to
Zakat on mutual funds and shares. So we're going to now break this down again into two parts. There
are broadly two categories of investments where we can put in our money one or those investments,
which will give us annual dividends. In mutual funds, you have these options, you have a dividend
option and a non dividend option, which shares as well, many people would buy a share and keep
holding it for a long period, they try to benefit through the yearly dividends which are paid out on
these investments. So if your intention of investment is to benefit from the annual profits, the
		

			yearly dividends, in this case, you need to pay the Zakat on the yield the profits that are made and
will profit at two and a half percent whatever the annual profit amount is. And then whenever you
sell the entire amount out, after two years, or five years or 10 years, whenever you sell the entire
amount, and you get a lump sum in your hand. At that time, you will pay two and a half percent on
the entire amount. In the second scenario where you have not opted for the dividend option, but
rather you have intended to invest like a trader, where you want to generate some short term profit,
then sell it and go for another investment which is available at a lower price, in which case your
		

			intention here is to act more like a trader. In a scenario like this, you will fall under the
category of paying Zakat on the entire sum of your holding
		

			at a market value. So whatever the date of his account calculation is, you take a stock of what is
your total investment amount lying over there, and what is the market value as the date of your
calculation, and you will be paying Zakat on the entire amount. So you are treating your investment
like a tradable good, like a trading stock, the total valuation on that date, you pay zakat on it So
in short, we have broken down our mutual fund or share investments into two categories, one which
will be paying us annual dividends of annual profits and our intention is to hold them for a long
period of time. The second is one way we are investing more like a trader, we want to benefit with
		

			the short term profits and then buy other stocks which are available at a lower price. In the former
category in the first category, we don't pay the card on the entire amount. Rather we pay the card
on the annual yield the annual profits that we are making a two and a half percent. And whenever we
sell off our investments after five or eight or 10 years, you pay the amount of Zakat on the entire
holding as well. In the second category where we are acting more like a trader. We will fall under
the category of Zakat on tradable goods which is the valuation on the date at the market value. You
need to pay two and a half percent on the entire holdings. I hope this is clear to all of you and
		

			Allah knows best