How Can You Calculate Zakat on Property and Land 2019

Zakat is one of the solid fundamental pillars of Islam that is obligatory on all Muslims provided certain conditions are met. The literal meaning of the word Zakat is to ‘purify’ and there are two types of Zakat in Islam,

• Zakat of the Body (Cleanse your body by fasting in Ramzan)
• Zakat of the Wealth, (The sum of money paid in Zakat form is called Nisab)

The importance of Zakat is stressed in Islam repeatedly as narrated in only the Quran,

“Spending out of what Allah has given you, means your energy, money, resources, possessions, talents, etc. or whatever else, to help and do good to those in need.”

On another occasion, it says,

“Establish prayer and give Zakah and bow with those who bow (in worship and obedience)

The purpose of Zakat in Islam is not to reduce your resources and wealth by giving it out, Allah promises that Zakat cleanses your wealth just like fasting purifies your soul, and the very act of giving Zakah to the deserving multiplies your money in abundance.

“Who is it that would loan Allah a goodly loan so He may multiply it for him many times over? And it is Allah who withholds and grants abundance, and to Him, you will be returned.”

Today we will discuss the calculation of Zakat (giving alms) on Property and Land investment for people who hold property.

Zakat on Property & Land

If you own a land for development use or built a house for your living then you are not liable to pay Zakat, however if you own a property for commercial use and intend to re-sale within a reasonably short period of time then it is liable to zakah on the basis of its current value on the owner’s zakah date. This means that if you expect to sell the land you own in full within a few months or a year, then on your zakah date you should calculate its value and pay zakah for the full value at the rate of 2.5%, just like a businessman paying for his stock.

Zakat on partial owned Plots

As for the plots which you have not paid in full yet, your zakah liability is for what you own. Thus, if you have paid 40% of the price of a plot of land which on your zakah date is worth 10,000, you pay zakah on 4,000. This means that your zakah liability for this piece of land is 100.

Zakat on Rental Property

Rental property owners should tabulate any saved rental income as well. if you build a residential complex, selling some units and renting others, then the money you receive for the parts you sell is liable to zakah at the rate of 2.5% on the day you receive the money. Same is the case for rental income you deduct 2.5% of total rent amount received as charity whether on a weekly, monthly or yearly basis.  For subsequent years, it is part of your money and it is zakah-able in the normal way. Also, consider the anticipated profit on the sale of an investment asset in the near future

Zakat on Unused Land

A land kept for years before resale, intended always for selling at the right price, is not liable to zakah until it is sold. Once sold, Zakat is payable [email protected]%  multiplying it with a current market value of the land each year the land was held in your ownership suppose 5 years, and those annual values are added up to conclude the total sum.

For example

Land is held for 3 years and their individual present value is,

Year 1 (Market Prize is X)

X multiplies with 0.25% = A (Suppose)

Year 2 (Market Prize is Y)

Y multiplies with 0.25% = B

Year 3 (Market Prize is Z)

Z multiplies with 0.25% = C

When you sell your land at or after 3rd year, Zakat liable on you is, A+B+C= (D)

D amount is paid off as Zakat from the total amount you receive from selling off land.

Additionally, Zakat cannot be given to:

• The rich
• Non-Muslims
• The family of the Prophet (Peace Be upon Him)
• Your direct dependents [including your wife, parents, grandparents, children, and grandchildren]

Zakat during the month of Ramadan is a multiplied act that will act as a shelter for you in Hereafter from Hellfire and Zakat and Sadqa is much appreciated and Loved by Allah Almighty as the rewards for this act are immense beyond your count.

Remember that Zakat is applicable on savings and assets that are in excess of your belongings for personal use. 

Allah SWT Says,

Those who hoard Gold and Silver and spend it not in the way of Allah-Give them tidings of a painful punishment.

It’s the best time of the year to pay your duties to Allah and earn His pleasure for that is All IT MATTERS. Pay Zakat, Do Good, Get Your Rewards.

And for those who are still not liable to pay Zakah, just give alms in Allah’s way, feed and clothe the poor, do little deeds of kindness, take care of your Muslim Brothers and Sisters. May Allah accept our good deeds and forgive us for its sakes. Amen.