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Atta-ur-Rehman

Can Current Liabilities Be Deducted From Zakat for Business?

8 min read

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Yes, you can subtract current liabilities from your business assets when calculating Zakat.

Zakat is a yearly obligation of 2.5% on a Muslim’s net wealth, which is calculated by deducting liabilities from total assets.

Here’s a breakdown:

Assets

Include all items of value that can be easily converted to cash, such as:

  • Cash in hand or bank accounts.
  • Stocks or investments.
  • Gold and silver.
  • Business inventory or other liquid assets.

Liabilities

These are amounts owed, which you can subtract from your assets, such as:

  • Bills and rent.
  • Personal loans or credit card debts.
  • Other debts are due for payment.

Zakat Calculation

To calculate Zakat:

  1. Determine total assets: Add up all cash, liquid assets, and other eligible items.
  2. Subtract current liabilities: Include debts that are:
    • Due within 12 months.
    • Personal loans from friends or relatives.
    • One year’s worth of installment payments on long-term loans.
  3. Calculate 2.5% of the net total: This final amount is the Zakat you owe.

Nisab Threshold

The Nisab is the minimum amount of wealth required to be eligible for Zakat. It is based on the value of 87.48 grams of gold or 612.36 grams of silver. Since these values fluctuate, the Nisab of Zakat threshold may vary.

By deducting liabilities, Zakat ensures fairness, requiring you to pay only for the wealth you possess and control.

And Allah knows best!

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WRITTEN BY

Atta-ur-Rehman

Atta-ur-Rehman, a specialist in Fiqh from Fazal-Jamiat-ul-Uloom-ul-Shariah, Jama'at ul-Umar Karachi, is an expert in Islamic jurisprudence. His expertise spans various aspects of Shariah, including Zakat, financial rulings, family laws, and ethical guidance in everyday life. With a deep understanding of Islamic principles, he provides a reliable insights into matters of faith, worship, and personal obligations.