Calculating Zakat on Investments: A Step-by-Step Guide

Zakat is one of the five pillars of Islam and applies to various forms of wealth, including investments. This guide will help you understand how to calculate Zakat on different investment types.

What is Zakat?

Zakat is an obligatory charitable contribution, typically 2.5% of qualifying wealth held for one lunar year.

Zakat on Different Investments

1. Stocks and Shares

For Trading Stocks:

For Long-term Holdings:

2. Mutual Funds and ETFs

Calculate based on the fund's underlying assets:

3. Real Estate Investments

Rental Properties:

Investment Properties for Sale:

4. Bonds and Fixed Deposits

Step-by-Step Calculation

Step 1: Determine Nisab

Current Nisab (minimum threshold): Approximately $4,000-5,000 (varies with gold/silver prices)

Step 2: Calculate Total Zakatable Wealth

Add up all qualifying investments and assets

Step 3: Deduct Debts

Subtract any outstanding debts from total wealth

Step 4: Apply Zakat Rate

If remaining wealth exceeds Nisab: Pay 2.5%

Example Calculation

Investment Portfolio:

Debts:

Zakat Due:

$72,000 × 2.5% = $1,800

Important Considerations

Remember, Zakat purifies wealth and helps those in need. Accurate calculation ensures you fulfill this important religious obligation.