Zakat on trade goods
How the nisab and value of stock-in-trade are worked out, and when profit and rented items are or are not liable to zakat.
Trade goods are things bought to be sold for profit: grain, cloth, household items, or anything else. Zakat is due on all of them.
Farḍmust do
Zakat is obligatory on all trade goods. The rate is one-fortieth (2.5%) of their value.
How the value is worked out
- The nisab is based on value, not on the item itself.If the value of the goods reaches the nisab of silver or gold, Zakat is due; if not, it is not.
- The value is checked at the end of the year, as long as it was not below the nisab at the start of the year.
- If the value was below the nisab at first but grows to reach it later, the year for Zakat is counted from when it reached the nisab.
- Value is worked out using the currency people normally use in that area, wherever the goods are.If goods are far away, the price in the nearest town is used, unless the goods themselves come from the wild, like timber that has not been sold.
- Zakat is due on the profit too, even if the profit itself has not been owned for a full year.
Goods meant for selling and earning profit, whether grain, cloth or household items, are called business assets (trade goods).
Farḍmust do
Zakat is obligatory on all types of trade goods, at the rate of one-fortieth (2.5%) of their value.
How the nisab and value are assessed
- The nisab for trade goods is based on their value.If the value reaches the nisab of silver or gold, Zakat becomes obligatory; otherwise it does not.
- The value taken for Zakat is the value at the end of the year, provided the value at the start of the year was not below the nisab (200 dirhams or its equivalent).
- If the value is below the nisab at first but later rises to meet it, the Zakat year is counted from the point the value reached the nisab.
- Value is assessed in whichever currency is most commonly used in that area.If both rupees and gold coins (ashrafis) are in common use, the trader may value the goods in either, but if one currency puts the goods below the nisab while the other reaches it, the second currency is used and Zakat is paid accordingly.
- Value is assessed where the goods are.If the goods are in a remote place, the price in the nearest inhabited area is used, unless the goods are themselves produced from the wilderness, such as timber, in which case they are valued as forest produce unless already sold.
- Zakat is due on the profit as well as the principal, even if the profit itself has not completed a full year.
- There is no Zakat on rented items, such as rental vehicles or rental property.
ʿUrūḍ at-tijārah (goods acquired for resale and profit, whether grain, cloth or household items) are business assets in the technical sense used here.
Farḍmust do
Zakāh is obligatory on every category of trade goods, at the rate of one-fortieth (2.5%) of their value.
The niṣāb and valuation of trade goods
- The niṣāb of trade goods is a niṣāb of value (qīmah), not of the goods themselves.Zakāh becomes obligatory once the value reaches the niṣāb of silver or gold; short of that, it does not.
- The value taken is that of the close of the ḥawl, provided the value at the ḥawl’s opening was not below the niṣāb (200 dirhams or its equivalent).
- Where the value begins below the niṣāb and subsequently rises to meet it, the ḥawl for Zakāh is counted from the moment the value reached the niṣāb, not from the original acquisition.
- Valuation follows the currency in common circulation (al-nāfiq) in that locality.Where two currencies are both current (rupees and ashrafīs, for example), the trader may value the stock in either; but where one currency would leave the stock below the niṣāb while the other brings it to the niṣāb, the latter governs and Zakāh follows it.
- Valuation is by the price prevailing at the location of the goods.Where the goods are held in an uninhabited or remote place, the price of the nearest inhabited locality applies, unless the goods are themselves a produce of the wilderness, such as unfelled timber, which is valued as wilderness produce unless and until sold.
- Zakāh is due on the profit (ribḥ) as well as the principal (ra’s al-māl), even where the profit itself has not completed an independent ḥawl.
- There is no Zakāh on items held for rent, such as a hired vehicle or a leased property.
Related
- Zakat on gold and silver The nisab and rate for gold and silver, what happens above the nisab, and the rules for mixed metals, currency and combined holdings.
- Miscellaneous rules of zakat The age of a zakat animal, why herds of different animals cannot be combined, and the option to pay zakat in cash or in kind.
- The ruling on zakat, and when it becomes obligatory Who zakat is obligatory on, what denying it means, and the eight conditions that must all be met before zakat is due.
- Who must offer qurbani, and when Who qurbani is obligatory on, the niṣāb that makes someone wealthy enough, who it is offered for, and the three days it can be done.