Yasir Qadhi – Fiqh of Zakat #2 – 401K, Stocks & Mutual Funds

			Bismillah Alhamdulillah wa salatu salam ala Rasulillah, who are the early he was the one who Allah
on my bed. Today will continue part two of our lecture on Zika. To be a little bit technical, I
apologize for that. But it needs to be done in terms of how to give us a gap. And I want to begin by
stating that modern rules of soccer are obviously very, we're not talking about classical fit, we're
talking about stocks, we're talking about mutual funds. We're talking about 401k. Obviously, our
modern scholars have tried their best to make HD hot and you will find a spectrum of opinion.
Therefore my advice to you all, don't play games with the Shetty out Allah knows your intention.
		

			Allah knows you're trying your best and Allah will judge you based upon your intention. Try your
best and Allah knows your sincerity. Ask the chef that you trust and then follow that advice. So
very briefly,
		

			how do we give zakat on our liquid assets? Technically, Zakat is due on the amount that a person has
owned for a whole lunar year as we said, so our scholars in trying to make Islam easy for us, they
gave us a simple rule. They said the fact that most of us are salaried employees, and that our bank
accounts are going to vary every single month, they advised us the following choose one date of the
year. And we're doing this lecture in Ramadan, because most of us choose a date in Ramadan, 50, and
Ramadan, 20th Ramadan, first Ramadan, choose one date of the year that is your as a cat to date. And
every single date that same date, all that you do is you look at your liquid assets on that date,
		

			and you pay 2.5% of your liquid assets on that date, you look at what you have in your bank account,
you look at the cash that you have, you look at everything that is basically liquid assets on hand
on that day, and you simply assume it to be your standard for the entire year. Now alternatively, if
you want to do the advanced, then technically you have to see every single month from the last year
how much you've had, you make a graph and have chart and it gets very, very complicated very fast.
That's why our scholars said the easy way. And in sha Allah, it is permissible, because most of us
on salaried checks, we're living on our salary checks by and large, our bank account varies slightly
		

			up and down, we have a steady balance, we know what that is. And generally speaking, we have the
similar amount on that date of our Zika. So we simply assume on that date, and we calculate simple
2.5%. Now that's liquid assets, that means our bank accounts, that means any cash that we have on
hand, that means as we said yesterday, the jewelry that is gold and silver, how about stocks,
stocks, once again, there are three or four opinions. And I'm not going to complicate things, I'll
try to give you the simplest possible but it can't be that easy. We have to divide stocks into two
categories. The first are those that are active day traders. They go in, they're aggressive, they're
		

			monitoring the price, they're seeing when it goes up or down, they're going to sell as soon as the
price is right, they want to sell it. And the way you know active traders, you know who they are,
because they're checking the prices almost daily, maybe 10 times a day, they're actually day
traders, they sell in the morning and day eight times maybe. But if you're actively monitoring the
price, and you're wanting to sell as soon as the price is amenable to what you want, this is your
active stock trading, you will deal with it like you deal with business merchandise, which means
2.5% of the paper value of the stock on the day of your zecca. So if you're 20 and Ramadan is the
		

			day of your Zika and you're an active stock trader, for example, you're buying and selling Uber or
you're buying and selling even a Bitcoin would be the same thing. So if you're buying and selling
these types of stocks actively or even Bitcoin as a type of currency, so if you're actively buying
and selling on the 20th of Ramadan, you simply log on you look at your value, and that 2.5% will be
your Zik as simple as that done deal. The problem comes, what if it's not an active trade? What if
you are a long term investor? What if you're just putting it into a mutual fund, and you really are
not monitoring the price. And it's really meant for a rainy day, it's meant for something long term.
		

			And this is where really you get a spectrum of opinion, and it is a gray area. And I'm going to try
to make it simple actually, I had a discussion with one of my teachers and mentors today so that I
can give you an opinion that is coming from somebody more knowledgeable then meet and after a long
discussion and he's an expert in Islamic finance. The problem with mutual funds is that there's a
catch would only be due on those assets that are tangible. And so it gets a little bit complicated
to make it very short what he suggested. If you have a mutual funds that is long term, which means
you are not actively buying and selling. In that case, your cost will be between point five to 1% of
		

			the paper value how he got to this percent
		

			integers a little bit more complicated. And I don't want to confuse you all. But the point is that,
on average 30% of the mutual fund is accountable, not set, not 100%. Why? Because if it's a long
term investment, Zakat is only due on the tangible assets, not on the services. And on average, a
mutual fund might have around 30 to 40% of tangible assets. So basically between point five to 1%,
if your mutual funds is more in the services sector, it'll go down, if it's more in the actual, if
you're in the oil industry, you're actually in the mutual funds of buying and selling oil mutual
funds of gold, in that case, is tangible assets is going to go up a little bit more to the 1%. But
		

			basically a rule of thumb, long term investments that are mutual funds that you're not actively
involved in buying and selling, then there's a catch is roughly 30% of that value. So that
translates as between point five to 1% of the paper value that you're going to see on the day of
years ago, the 28th of Ramadan, you will log on and you give between point five and 1.5. If it is
more services, and one if it is more 1%. If it's more actual tangible assets. That's the range that
my teacher and mentor gave. Now we move to the other problematic issue, and I'm going to confuse you
a little bit more as well. And that is the 401 K or the retirement one. And as some of you already
		

			know what is going to come right now. I've been on this podium mashallah Tabata cola nine years in a
row, every year I give a lecture on Zakat and Ramadan, and I have vacillated my opinion back and
forth twice in the last nine years. Now I'm going to vacillate one more time three times changing,
and it's not my fault. This is Allah's clutter honors that we keep on changing our minds in this
regard, and inshallah it's assigned also of active research. 401 K is definitely a very, very
discussed area amongst your Adama. And for when I first came here, the first time I gave all of you
you should give zakat on the 401k amount around five, six years ago, I changed my position to that
		

			of Shikara Baba and others who said you don't give us a cap, and so you give zeros. Then three years
ago, I joined the fifth Council of North America. For the last two years, we have been debating 401
K's through in our meetings we are constantly this has been the number one issue for the last two
years of the fifth Council. What is this account on 401 K's now. And in fact, we just finished our
meeting last month. So the fifth Council in North America, which is the senior most oldest body of
Islamic scholars in North America, and that hamdulillah I'm a member of that, and I will
respectfully follow their positions. And I'm a member I have to follow their position as well. And
		

			actually now they have convinced me of this as well, that in fact, the position that is now from the
fifth Council is the following. And that is that. The first one is that you will give zakat on the
amount that is cacheable after penalties and taxes. Okay, if you were to access that 401k, whatever
the penalty is, get rid of it, whatever you would get tax, get rid of it, then that final amount
2.5% of that theoretical amount. Let me give you a simple example. Suppose your 401 K had 200,000 in
it, and you have a 20% penalty if you were to cash it out. So if you have a 20% penalty that makes
it to 160,000. Suppose your tax bracket is roughly 25%. So 160 1000 then goes to 120 1000. Okay, now
		

			you calculate 2.5% of that 120 1000. And that works out to $3,000 $3,000. That's my whole that's
reasonable. If your 401 K is 300,000 then $3,000 Is or sorry, 200,000, then $3,000 is reasonable
amount for you to give now, one of the discussions in our field counsel was what if somebody is at
the end of retirement he has 300,000 or 200,000, because me but he doesn't have 3000 of his check to
give what does he do then? So the fatwa then is the following. It's very simple. 3000 is a debt owed
to Allah. And Allah will forgive that debt until you can pay it. So if you can pay 1000 of that 3000
You pay it now and you write down on a piece of paper 2000 for 2019 next year, another 2000 Next
		

			year, another when you finally cash out your 250,000 if you actually added up your debt owed was
going to be maybe 789 1000 In Zakat, and so you will pay it when you cash out, but it is a debt owed
to Allah subhana wa Tala and Allah will not ask you to forcibly cash out your 401 K if you cannot
afford to pay. So very simple. You pay what you can have that 2.5% That is cacheable clear enough.
And whatever you cannot you just make a note of it that for this year, I wasn't able to pay that
much. And it is an easy debt. It's a non binding debt until you cash out the 401k. When you cash out
the 401k then you add up those debts and generally speaking, it's not payable for those of us that
		

			are struggling at the end of our retirement not at the beginning at the
		

			be getting the 401k will be 15,000 25,000 35,000 gonna be reasonable but towards the end of our you
know closer to retirement, maybe it is a very large amount and we cannot afford to pay in which case
I follow who I must set a follow up now you can live for long enough and Illa Wasaga you pay what
you can and you just make a note that I wasn't able to pay this much. And when you actually cash out
the 401k you will then pay that as a cat as a one off and this is, I think a reasonable fatwa and
Allah Subhana Allah knows best. The final issue that we're going to discuss is zakat on business
commodities. What if you own a business, those who buy and sell business commodities, those who buy
		

			and sell merchandise, for example, you own a gas store, convenience store, you own a furniture
store, you must give zakat on the value of the commodities that are actually purchased and sold. And
you will calculate 2.5% On the day of your zakat. So 20th of Ramadan, you will do an inventory your
stock and whatever is the retail value whatever is the general market value of that merchandise you
will pay 2.5% of that Gods on that and Allah knows you're trying your best you're not having a trick
that the day before your God does do you get rid of your merchandise Allah knows this that you're
playing a fair game and whatever is the 2.5% on the day of your Zik at that is going to be
		

			calculated. Zakat is due only on merchandise that is purchased and sold. If you own something that
you rent for example, rental property, for example, you own a house and it is meant for rent, you do
not give zakat on the cost of the house you give zakat on the rental income that you have had for a
year. So basically, if you have a house that you're renting out, you're gonna get money, the money
is gonna go on your bank account. Therefore those accounts will be on the money with the rest of
your money that you will calculate on the 20th of Ramadan. Zakat is not due on the cost of the item
that is rented. Zakat is only do 2.5% on merchandise that is purchased and sold. And I said the
		

			final point, one of the points that caught on loans is a cat on loans, when it comes to loans. In a
nutshell, the shady AI distinguishes between what are called Hard loans and soft loans. And a to put
it in a very easy manner. If the money is as if it is non existent, you can ignore it. Suppose you
gave somebody $10,000 And the person is in struggling circumstances you don't know when this person
is going to pay back, then there is no tickets because you don't have anything of that. But suppose
the person has now the capacity to pay you back. But you're just not asking because you don't need
it. I mean, okay, whenever I want to ask you about and you know that this brother or you assume that
		

			this brother can pay you back 10,000 In this case, there is a cat you will have to add it that hey,
this person owes me 10,000 and I all I have to do is make a phone call, but I don't need it. That's
why I just don't want to cause any issues. Whenever I need it. I'll call him in this case the 10,000
will be added to the amount of Zika. However, if it's a soft loan, and also a long term loan, then
there is no
		

			riddoch deduction of Zika to because all of us have long term loans that are payable in
installments. If we were to do that the average Muslim has a mortgage and so all of us are negative
assets. Anyway, we do not take into account large long term loans when it comes to Zika. We ignore
them. We have a house mortgage of $300,000. That does not come under Zika. There is no calculation
we don't subtract 300,000 from our net assets, or else every one of us would be negative. It's only
short term loans that are solid that we know we have access to. Those are the ones that we will add
two hours ago, otherwise we do not add that two hours that gap obviously is the gas cannot be given
		

			on hold on money. The purpose of Zakat is to purify. So if we seek Allah's refuge, if one of us has
income that is haram, the concept of paying zakat on that is ludicrous. It is nonsensical. It
doesn't make any sense. The purpose of Zika is to purify. And so if a person owns a liquor store, if
a person has something completely haram and they're getting this money completely from haram, this
is the month of Ramadan, they need to repent from that money in totality and they should get rid of
that money and give it to the poor Allah will reward them for their pure pure intention and not for
the deed and money itself because the money is filthy. Will Allah who play Ebola Ebola Yeah, but
		

			Allah only accepts that which is pure. And to conclude, therefore, try your best foot to Allah Hi,
Mr. Tato. This is the month of Ramadan, the month of charity try your best to make a reasonable
calculation of Zika diversify your investments in Zuccotti as well give to various funds as well.
And if you allow me a quick plug, I myself have a project that I'm doing which is to open up a
school for the Kashmiri refugees which is the cat illegible because 10% of them are orphans so that
the cat goes to the orphans I have visited the province and I'm directly involved if you're
interested. You can come and speak to me or log on to the videos as well but gives the car to me
		

			Every single charity that you feel comfortable and the best Zakah that you give will be to extended
family and relatives that needed and the best zakah is not told to them it is given to them as a
gift and ALLAH SubhanA wa Tada knows it is aka May Allah accept our sadaqa in this month and
inshallah will continue irregular heart that is tomorrow Salam aleikum wa rahmatullah wa barakato.