Question:

Who has to pay zakat on borrowed money, the borrower or the lender? And how will zakat be paid on it?

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

The lender has to pay zakat on it, not the borrower. However, the lender does not have to pay zakat on it until he gets it back from the borrower. If, for example, the borrower returns the money after three years, the lender then will have to pay zakat on it for each of the three years. When paying zakat for the three years, the lender will have to pay it like this: For the first year, he will pay zakat on the full amount. For the second year, he will have to pay zakat on the full amount minus the zakat amount for the first year. For the third year, he will have to pay zakat on the zakatable amount for the second year minus the zakat amount for the second year. Understand this with the following example:

Suppose A borrowed $1000 from B. B is liable to pay zakat on the $1000. However, B does not have to pay zakat on it until he gets it back from A. Suppose A returns the $1000 to B after three years; B will then have to pay zakat on it for the past three years in this way: For the first year, he will have to pay zakat on the full amount i.e. $1000 ,which comes to $25. For the second year, he will have to pay zakat on $975 (1000 - 25 = 975), which comes to $24.38. For the third year, he will have to pay zakat on $950.62 (975 - 24.38 = 950.62), which comes to $23.77.    (Shaami: 2/260 Saeed; Ahsanul Fatawa: 4/271, 274-275)

And Allah knows best.

Mufti Faizal Riza
26/07/2013
Darul Ifta Australia
www.mufti-online.net  
DISCLAIMER – Mufti-Online.net questions
Mufti-Online.net answers issues pertaining to Shariah. Thereafter, these questions and answers are placed for public view on www.mufti-online.net for educational purposes. However, many of these answers are unique to a particular scenario and cannot be taken as a basis to establish a ruling in another situation or another environment. Mufti-Online.net bears no responsibility with regards to these questions being used out of their intended context.
  • The Shariah ruling herein given is based specifically on the question posed and should be read in conjunction with the question.
  • Mufti-Online.net bears no responsibility to any party who may or may not act on this answer and is being hereby exempted from loss or damage howsoever caused.
  • This answer may not be used as evidence in any Court of Law without prior written consent of Mufti-Online.net.
  • Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
Donate Now
Support Darul Ifta Australia by donating.
DISCLAIMER: 

Darul Ifta Australia provides answers to queries pertaining to Islamic law. Some answers are subsequently published publically for educational purposes. The queries are taken at face value since we have no way to investigate the actual circumstances or context. Fatwas (answers; verdicts) are unique to the stated query and cannot be used to establish another ruling or applied to another situation. We bear no responsibility for circumstances and situations where incorrect or incomplete information is given in the question. We are also not responsible if the answers are misinterpreted, applied incorrectly or taken out of context. We reserve the right to revise and update answers as and when needed and required.
  • All fatwas given on this site are based specifically on the question posed and should be read in conjunction with the question.
  • Darul Ifta Australia bears no responsibility to any party who may or may not act on any fatwa and is being hereby exempted from loss or damage howsoever caused.
  • No fatwa may be used as evidence in any court of law without prior written consent of Darul Ifta Australia.
  • Any or all links provided in our emails, fatwas and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.

​
© Copyright 2022 Darul Ifta Australia