writer
Atta-ur-Rehman

Is Zakat Obligatory for Every Shareholder?

8 min read

zakat-banner

Yes, Zakat is obligatory for shareholders, but the way it applies depends on the type of shareholder and their intentions with the shares.

There are two categories of shareholders in Zakat:

  1. Investment Shareholders

These shareholders purchase shares primarily for long-term investment purposes and to receive dividends.

In this case, the shareholder is obligated to pay Zakat. However, it is only on the portion of assets on the balance sheet that is zakatable, not on the entire market value of the shares. The Zakat is calculated based on the zakatable portion, which typically includes assets that are not exempt, such as cash or receivables.

  1. Trading Shareholders

This category consists of those who buy and sell shares with the intention of trading for profit. These shareholders must pay Zakat on the market value of the shares at the time the Zakat is due. This applies because the shares are viewed more as inventory for trading, and the entire market value is subject to Zakat.

Thus, whether Zakat is payable on the entire market value of the shares or just the zakatable assets depends on the purpose of holding the shares. Investment shareholders are concerned with the financial assets tied to the shares.

Trading shareholders are required to pay Zakat on the market value, as the shares are treated as part of a business's inventory. As always, it’s important to approach Zakat with clarity and intention, following the guidelines that best align with one’s financial dealings.

And Allah knows best!

writer

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.