Fatwa ID: 08314

 

 

 

Written by Alimah Aisha Qureshi

 

 

 

Question:

 

A gives B a $3000 loan payable over 3 years, $1000 a year.

 

B has the $3000 in his account on his Zakat date.

 

Using the 1-year rule, B deducts $1000 as liability and pays zakat on $2000.

 

A pays Zakat on the full $3000 because it is Dayn Qawi.

 

This means the Zakat is being paid twice on the $2000. Both A and B are paying Zakat on it.

 

Is that correct?

 

 

In the name of Allah, the Most Gracious, the Most Merciful

 

 

 

Answer:

 

Zakat, is an obligatory form of charity in Islam, is required on wealth that reaches a certain threshold and has been held for a full lunar year. When it comes to loans, both the debtor (borrower) and the creditor (lender) have specific zakat obligations. In a situation where a loan is owed and there is an overlap between the wealth of the borrower and the receivable amount of the lender, it can lead to double zakat payment on the same money.

 

Zakat on the Borrower’s Wealth: B, the borrower, has a loan of $3000 payable over 3 years, with $1000 to be paid each year. On the zakat date, B has the full $3000 in his account. According to the 1-year rule in zakat calculations, B deducts the amount of the loan that is due within the year (in this case, $1000) as a liability, leaving $2000 as his wealth on which zakat is due. Therefore, B will pay zakat only on the $2000 that remains after the liability deduction.

 

Zakat on the Lender’s Wealth: A, the lender, lent $3000 to B and is expecting repayment over the course of three years. Since the loan is considered a Dayn Qawi (a strong, recoverable debt), A is obligated to pay zakat on the full $3000, as this amount is still part of A’s wealth until it is repaid by B. Even though B holds the money in his account, A still treats it as part of his assets and, therefore, is required to pay zakat on the entire $3000.

 

The Overlap in Zakat Payment: The overlap occurs because $2000 is present in both B’s account and A’s receivable loan balance. B pays zakat on the $2000 he holds, while A pays zakat on the same amount as part of the loan owed to him. This results in both parties paying zakat on the same $2000, leading to double zakat payment on this portion of wealth.

 

 

 

References:

 

(و) اعلم أن الديون عند الإمام ثلاثة: قوي، ومتوسط، وضعيف؛ (فتجب) زكاتها إذا تم نصابا وحال الحول، لكن لا فورا بل (عند قبض أربعين درهما من الدين) القوي كقرض (وبدل مال تجارة) فكلما قبض أربعين درهما يلزمه درهم (

Radd al Muhtar Vol 2 Pg 305 Maktaba Shamila

 

 

 

 

Only Allah knows best.

Written by Alimah Aisha Qureshi

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham