Zakah On Investment

Question

I wanted to learn what is your view on application of zakah on money invested in stock shares? Do we need to pay zakah on the dividend alone or on the original investment, which cannot be divested at any point of time or both? In addition to this, we also posed a question that if Zakat is not applicable on the original investment, then whether Zakat is payable on monthly income which is received after deduction of 10% income tax, irrespective of the statutory exemption of income from income tax?


Answer

Zakat is either paid on the original amount (principal) or the return on investment. When an investment gives returns, it has always got to be on the returns at the rate of 10%. In case you are paying 10% tax at source, your Zakat has already been deducted. You don't have to pay anything further, except what you may want to spend voluntarily in the way of Allah.

About the Author

Dr. Khalid Zaheer


Dr. Khalid Zaheer (1958) is currently serving as Vice President Al-Mawrid Institute of Islamic Sciences, Lahore, Pakistan. He is a member of the Executive Committee and also a member of the Board of Governors; Al-Mawrid.

Prior to this, he taught at the Lahore University of Management Sciences and before joining LUMS, he taught at the Institute of Business Administration, University of the Punjab (1986 to 1990) as a Lecturer and later (1994 to 1998) as an Assistant Professor.

He served as an adviser to Crescent Standard Islamic Bank on “Islamic Banking” from July 2005 to June 2006, as Shari’ah Adviser to Atlas Islamic Fund from 2006 to 2007. He was appointed in January 2000 as a member of the task force of the Finance Division of the Government of Pakistan. He was also appointed a non-official member of the Board of Management of Pakistan Bait-ul-Mal in May, 2000; he resigned from the post in September 2000.

He has delivered lectures at the Administrative Staff College, National Institute of Public Administration, and Pakistan Audit and Accounts Training Institute etc. on various Islamic topics. He has delivered lectures also on topics relating to Islamic Studies at Universities of Lampeter, Aberystwyth, Swansea, and Exeter and the Islamic Foundation in Leicester during 1990-1994 in Britain and in various departments and hostels at the Punjab University in Pakistan from 1994 to 1998.

His writing includes his Ph.D. thesis titled, “An Enquiry into the Basic Concept of Banking as Perceived by the Spirit of Islamic Economic Justice” (1994). He authored a paper titled “Religious Tolerance: An Islam Perspective” he is participated as a member of the faculty in the Inter-University Short Executive Program on “Religion: Conflict and Peace?” in Bangkok from July 21 to July 25, 2003. He read his article titled, “Islamic Justification of Indexation in the Modern Financial Markets” in an International Conference of Islamic Economists and Statisticians in Lahore in 1995. He authored an article: “Why Riba al-Fadl is Unacceptable?” His article “Human Rights Law and Islamic Shari’ah: Areas of Compatibility and Conflict” (5000 words) was published in the December 2004 issue of Renaissance, a monthly Islamic journal. He made a presentation on “How Can Muslims Be Friend with Non-Muslims?” at the international Conference on “Common Values between Islam & the West”. He also made presentations on “Significance of Business Ethics” and “What Has Kept Pakistan from Progressing?” He also read a paper “Understanding of Riba: A Critical Analysis.”

He maintains his personal website. He regularly contributes in the monthly religious magazine, “Renaissance”. He has also contributed to Urdu periodicals “Ishraq”, “Tazkir”, and “Su-e-Haram”.

Dr. Khalid Zaheer did his Ph.D. from University of Wales in 1994 in “Banking Islam”. Prior to that he did his M.B.A from University of the Punjab in 1982, B. Com. From University of the Punjab in 1978, Intermediate from Government College Sargodha in 1975, Matriculation from P.A.F. College Sargodha in 1973. He received his religious education through associations with Dr. Israr Ahmed (1978 to 1980), Mawlana AminAhsan Islahi (1980 to 1990), and Mr. Javed Ahmed Ghamdi (1980 to date). He also went through a formal course on Arabic and Islamic learning from Al-Mawrid, an institute of Islamic Sciences, from 1983 to 1984.