I am finding it confusing on which price our Zakat is supposed to be based on. As an example, Zakat has become compulsory on me. Now, I had bought this gold from the shop for $50. And if, for example, now I sell it, the price will obviously go down. So for instance I will be selling it for $40 to the gold shop owner.
Me question is: will I be paying Zakat on the $50 (the price I bought it for from the shop) or is it on the $40 (the price I am selling it for)?
In the Name of Allah, the Most Gracious, the Most Merciful.
Jazakallah for writing to us and for bringing to our attention this important issue. This issue is such that a lot of people have misunderstandings about it. The answer to your question is as follows:
Zakat is obligatory on gold and silver at the rate of 2.5% of the total weight of the gold or silver. There are a few ways Zakat on gold and silver can be paid:
o It is permissible to give actual gold and silver in Zakat. For example, if someone has gold jewellery that weighs 100 grams, she can give 2.5 grams of gold as Zakat on the jewellery.
o It is also permissible to pay Zakat in cash. This is
done by giving the market value of 2.5% of the weight of the jewellery in
Zakat. For example, if someone has gold jewellery that weighs 10 grams, she
will have to give the market value of 0.25 grams (i.e. 2.5% of 10 grams) of
gold as Zakat. Hence, if the market value of gold is $50 per gram, she will
have to $12.50 (0.25 x 50) as Zakat.
o It is also permissible to pay Zakat in kind. In the abovementioned example, instead of giving $12.50, she can give something -- such as medicine or blankets or flour etc. -- with the value of $12.50.
From the above it becomes clear that the price the person bought the jewellery for is irrelevant when it comes to calculating Zakat.
1) Market value of gold means the price on which gold is sold for where you live. (Note that on our website we periodically update the gold and silver prices as a guide only. If the prices on our website are different from the local market value, the local market value must be used when calculating Zakat).
2) If the gold jewellery contains precious stones – such as diamonds etc – then the weight of the precious stones will be deducted from the weight of the jewellery.
3 If the gold used in the jewellery is not pure
gold then the ruling on it is as follows:
o If the ‘gold’ contains 50 percent gold or
more (i.e. it is 12 carat gold or more), it will be counted as pure gold in the
sense that the total weight of the jewellery will be taken into consideration
when calculating Zakat. However, the market value of pure gold will not be used
to calculate Zakat; instead the market value of the same type of gold will be
used. For example, for 18 carat gold jewellery, the market value of 18 carat
gold will be used to calculate Zakat.
o If the ‘gold’ contains less than 50 percent
gold (i.e. it is less than 12 carat gold), then there are two possible
4) The rulings mentioned above for gold jewellery also apply to silver jewellery.
5) If the jewellery is made of a mixture of gold and silver then the
following rulings will apply:
o If the gold is more than the silver, it will be
counted as pure gold in the sense that the total weight of the jewellery will
be taken into consideration when calculating Zakat. However, the market value
of pure gold will not be used to calculate Zakat; instead the market value of
the same type of gold will be used.
o If the silver is more than the gold (as is the case in some 9 carat white gold), Zakat will be obligatory on the content of silver and gold respectively. For example, if a white gold ring contains 1 gram of gold – the market value of which is $50 – and 2 grams of silver – the market value of which is $4 – then 2.5% of $54 (which comes to $1.35) will have to be given on it as Zakat.
Note that all the rulings mentioned above are applicable to gold and silver jewellery/items that are not merchandise i.e. they were not purchased with the intention of resale (Note that if a person buys something for personal use and later decides to sell it, it will not be counted as merchandise). If the gold or silver jewellery/item is merchandise, some of the rulings will be different.
(Fatawa Hindiyya: 1/197; Fatawa Tatarkhaniya: 2/177; Fatawa Mahmudiya: 9/378; Fatawa Usmani: 2/67; Zakat ke Masa’il ka Encyclopedia: pg. 246; Sona Chandi ke Islami Ahkaam: pg. 76; Ahsanul Fatawa: 4/280)
And Allah knows best.
Mufti Faizal Riza
Darul Ifta Australia
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