Calculating zakat before or after profit

Fatwa ID: 02232

Answered by Maulana Mujahid hussain

Question:

I have a mini business which I usually run at charity events by hiring out stalls. The items I sell are personalised items, so I purchase pens, pencils, keyrings, bookmarkers and other items. I then use special machine to hand engrave names and messages on the items. For example, I may purchase a pack of 10 pens at wholesale for £3. I will then sell each individual for £3.50 with the name engraved upon request.  All my items are currently considered unfinished because they are not engraved. I only engrave upon request.

How do I calculate zakat on these? Do I use the £3.50, or the wholesale price ? I am confused. Please, can I have some guidance. Jazakumullah

Answer:

Bismillah

You calculate the Zakah using the current market price of the pensyou have in stock.

(Fatawa Hindiya V 1 P 198 Publisher Darul-Kutub-Alaalamiya

باب زكاة الفضة والذهب و العروض)

So for example, you have hundred and twenty pens in your possession. You paid £60 for the pens. Each pen cost you 50p.

Hundred of the pens are not engraved. The current market price for each of these pens is £1 ( this is not the price you paid for the pens nor, necessary, it's  the price you sell at, but the current price these pens are available for at the market)

Also you have twenty pens which you have engraved. The current market price for such  a pen is £3.50.

This would mean the current market price for the  pens  in your possession is £170. That is £ 100 for the  pens which are not engraved and £70 for the engraved pens. As zakat is calculated at 2.5% of your merchandise, you would have to pay £4.25 on your merchandise.

However please bear in mind Zakat is only  due on merchandise when you total wealth ( that  including savings, cash and trade merchandise) reaches the nisaab (the minimum amount that a Muslim must have before being obliged to give  zakat).

( Radul-Mukhtaar P 234 V 3 publisher Darul-Kutub-Alamiya باب زكاة المال)

(Al-Lubab fe sharhil-Kitab p 145 V 1 publisher Qadeemi Kutub Khana باب زكاة العروض)

Only Allah knows best.

Written by Maulana Mujahid hussain

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

Comments are closed.