In Islam we have Ushur for produce from agriculture and also we have a concept of zakat on wealth. My question is about the status of land in zakat. What is the Islamic viewpoint on zakat on land. My question is about two kinds of land
(1) Land which is being used for agriculture
(2) Land which is not being used for anything but owned by someone.
If there is zakat on land property then what will happen in the first case. Do we have to pay both 2.5% zakat on land value and 10/5% on production? For the second case, is there a difference in Islamic rules between the agricultural land and residential plots for zakat?
We believe that there are two types of zakah,
a) zakah on produce and
b) zakah on wealth.
The respective rates in the Islamic Shari'ah according to Mr Ghamidi follow:
"(a) Wealth:2 ½% annually
(b) Produceem:mad:i) 5 %: on all items which are produced by the interaction of both labor and capital, (ii) 10 % on items which are produced such that the basic factor in producing them is either labor or capital and (iii) 20% in items which are produced neither as a result of capital nor labor but actually are a gift of God." ( Ghamidi, Mizan, http://al-mawrid.org/pages/articles_english_detail.php?rid=192&cid=55&search=land)
Agricultural land is not subject to zakah because it is the tool of production. Land such as residential and commercial plots is also now considered assets. Therefore, it is considered one's wealth and will be zakated annually. However, when we start constructing home to settle there it becomes under personal use and everything under personal use is exempt from zakah.