Is Zakat Applicable to Mutual Funds?

Yes, zakat applies to mutual funds, but the amount you owe depends on your investment's purpose. 

Here’s how it works:

• If the investment is for dividends:
• You need to pay zakat on 25% of the current portfolio value.
• This is because only a portion of the fund consists of zakatable assets like trade receivables and cash.
• If the investment is for capital growth (resale purpose):
• Zakat is due on the total value of the portfolio.
• Since you intend to sell the investment, it is considered similar to trading stock, which is fully zakatable.
• Zakat must be calculated on the portfolio’s market value on your zakat due date.

Note: Ensure that the mutual fund's underlying investments are Shariah-compliant to align with Islamic financial principles.

For those seeking to maximize the impact of their zakat, directing it towards initiatives like Pakistan Sweet Home can be a meaningful choice. Recognized as a leading orphan care foundation, it works tirelessly to uplift the lives of vulnerable children with dignity and compassion.

And Allah knows best!

Other Zakat Questions You May Have

• Is Zakat Due on Business Production Assets?
• Is a Creditor Required to Pay Zakat on a Loan?
• Is Zakat Required on Sukuk al-Ijarah?
• Is Zakat Obligatory on Illegitimate Earnings?
• Can Unlawful Earnings Be Purified by Giving Zakat?
• Is Zakat Obligatory on a Personal Pension Plan?