Zakah (Zakat) On Mutual Fund Shares

Mansoor Danish


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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

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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

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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

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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

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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

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Allah knows best