Why I Don't Pay Zakat On Stocks (Mostly)
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- Опубликовано: 16 сен 2024
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Why I Don't Pay Zakat On Stocks (Mostly)
📌 Video Summary:
We delve into an often-asked question in Islamic Finance: "Do you owe Zakat on stocks?" We're not just repeating mainstream views; we're offering a fresh perspective through ijtihad. If you're serious about understanding Zakat in a way that aligns with both the Qur'an and Sunnah, this is the video for you!
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👉 What You'll Learn:
1. What makes an asset zakatable? We break it down into four core attributes.
2. What did Prophet Muhammad (pbuh) say about Zakat?
3. Do stocks fit the criteria for being zakatable assets?
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🔵 Important Points:
- The topic of Zakat requires ijtihad, as neither Allah (swt) nor His messenger (pbuh) have directly addressed Zakat on stocks.
- We challenge the often-repeated condition that an asset must have "Growth or the potential to grow" to be zakatable.
- What makes an asset zakatable might actually be its "lack of usefulness" or idleness, as opposed to its growth potential.
- We argue that stocks, by contributing to societal growth and business development, are not idle wealth and thus may not require Zakat.
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👍 If this video adds value to your understanding of Halal investing and Islamic Finance, please like, subscribe, and share with others who may benefit.
Let's make smarter Halal investing decisions, together!
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Note: This video represents personal ijtihad and viewers are advised to consult with their financial and religious advisors for personalized guidance.
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DISCLAIMER
Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your own due diligence before making any investment decisions.
Allah knows best. I would pay. Just to be safe. And we don’t loss in giving charity.
this guy doesn't have much money... :D
in stocks
Excellent discussion, well done.
Thanks for sharing your viewpoint , insights and research. Great video. I will however pay some percentage to be on safer side. Charity will still annihilate sins and help the poor and boost your wealth. you spend more and Allah will give more. His bounty is limitless.
Mashallah, may Allah forgive us for our shortcomings and guide us to the right matters. Thank you brother for this video.
So nice of you, Ameen
Gazak Allah Khaer, great video thank you for your efforts
Excellent work. Jazakallah khayran. I reached the same conclusion a few years ago, and I dont even own or have any interest in stocks. If two partners shared ownership of a baqal or restaurant on the corner, they would not calculate the "value" of their baqal ownership every year and pay on it. A butcher who does so would eventually sell his fridge just to make the payment. I think there is some lazy thinking involved in prior opinions, and there are some who wish to make islam more difficult than it needs to be. I believe owning stocks altogether is inadvisable however but thats another story.
Thanks for sharing, well thought out
I think it would be far more accurate to say the 4th condition is zakat is due on what exceeds your personal use. For example, we don’t pay zakat on houses or cars we own.
When it comes to stock, it is no different than zakat on business. Zakat on business is simple - it is the zakat on liquid assets and inventory aka as current non-fixed assets.
You can lookup any company’s balance sheet and figure out the percent of its current assets (inventory, products, accounts receivables, cash minus current liabilities) and pay zakat on that percent that is usually between 25-40% of the stock value.
as always logical answer thank u
When you made the point of idle asset, it reminded me of the term I learnt at school. Very interesting view indeed.
Stocks grow , i purchased some stock few years ago , today value has almost tripled. I can get cash whenever i sell , so it is equivalent to cash and zakat payable .
Same with your second residence if you have one and yet is exempt of Zakat
Great video thank you!
The moment I heard “the opinion is of my own ijtehad”…. I stopped the video.
Bro, if everyone built their own version of what’s right and wrong, that is a sure shot way to the hell fire. Because it opens the doors to applying interpretation to everything .
Then most of Islamic thinkers like Ghazaly etc would have not existed according to your “logic” yet they left far more useful knowledge behind them than your comment
@@MariAm-tc9xmAre you comparing Ghazali to brother Rakaan in how entitled they are to do Ijtehad? Even brother Rakaan himself wouldn’t do that. The comment about stopping the video is harsh and I don’t agree with it. But your reply doesn’t really add any value.
@@ramyomar you said if everyone built their own version of what’s right or wrong that’s is a sure way to the hell fire, I’m saying that if you use that logic we would not have had any Muslims thinkers in history, there is nothing wrong in thinking ways to add value to the community with strong facts instead of just criticising without backing it up
Let me relate to what you say. Imagine every nation is a big company that sells its share in the form of bonds
then nobody need to zakat money because it is not idle, since by holding on to money you are keeping the nation in business
By buying the currency or bonds, you are supporting the nation so it will grow and to have positive trade surplus
if everyone sells the currency, the currency plunges, and it will affect every single person and business in the nation
2.
Zakat on land intended for buying and selling - yes (in your case is no)
Zakat on land being used personally - no (in you case is no)
Zakat on land not being used personally or by anyone - no (in your case is yes)
Actually I have a confusion. The Zakat is applicable to goods that are held by a business for selling. So stocks we can sell anytime. So how is it different than the goods for sell? Goods are not idle for a business as well. You need to store goods for a business to operate such as grocery stores.
For the first time I disagree with you. Like Stocks of a juice company that produces juice benefits the rich because when juice is sold then the profit comes which in turn gives money to the owners. The poor only pays for the expensive juices that are availabile in the market to enjoy the taste. Not helping the poor at all. Just money circulating between the rich to get them richer. The purpose of zakat is lost in this case. Money should also go to the poor so that the poor can also do and make something productive for the society. Moreover, if u see the character of Prophet (S. A. W.) u would find that he always give almost everything in Charity. He had a bigger goal that is the love of Allah and to get the highest position in Jannah. So zakat is like a obligated charity by Allah so that wealth also goes to the poor so that they can also contribute to the Islamic society.
I always think the main consideration: 1- Is it excess wealth? 2- is it wealth that are partly own by other people that inhabit this world? Is that land 100% yours? Is that wealth 100% yours? Every single share in the stock? A company that has huge asset of land and extracting value from it, example oil, is that oil really theirs and yours (as a stockholder)? Who really owns the oil? Allah SWT of course and was given to whom for stewardship? Stewardship and not ownership. Could it be that at least 2.5% of the wealth are the rights of others (poor and unabled)?
Stocks give out dividends so money is not idle and is growing. So shdnt by your own theory stocks shd be considered for zakat calculation as assets??
Holding bitcoin seems zakatable, right? but buying the stock microstrategy, a company that primarily just holds Bitcoin, isn't?
This is a great question. For stocks that aren't businesses, and just hold an asset, like GBTC or Gold Funds, those would be zakatable as they represent an underlying and unproductive asset (bitcoin and gold). To the extent this is true about Microstrategy it would also apply.
Sorry about that, my previous comment had a typo.
Thank toy for this informative & insightful video! Although your video is specific to Zakat on Stocks it raises the question on the applicability of Zakat for businesses.
Are you suggesting that productive/for profit companies are Zakat exempt? Or companies would still have to follow the same logic to see if their underlying assets match the 4 attributes you list?
Following the same logic you apply on the societal benefit arising from stocks acquisition providing liquidity to companies. One could argue that some assets (especially current assets) remain in companies surpassing the HAWL period and could be defined idle as well, hence Zakatable.
For example, in a conventional retail business, Current Assets & Liabilities balances could match these criteria on any given Lunar year and during which these funds had not contributed directly to the company's operations but definitely played a role in keeping the business sound and provided sufficient liquidity levels (e.g. liquidity ratios, turnover cycles, etc...).
My question to you is that should we treat each asset category separately to assess if Zakat is applicable? Or the logic here is that productive companies are completely Zakat exempt?
You would have to assess the categories separately. Not everything claimed by a business can be zakat-exempt. Only that which is productive.
Im sorry I can't agree with what you are saying here it doesn't make sense Islamically.
Nothing grows on its own, you describe Gold and Silver being idle. Anything we buy is idle we derive investment from the efforts of others. Thats a principle that makes these all growth assets.
Your definition of 'Usefullness' is just a non crystallised asset. To define stock or inventory items due to be sold as 'not useful', is problematic they are useful
They have a business use that is beneficial to the owner, to ourselves as they are to be sold for profit. You will still pay ZAKAT on these when sold.
We dont invest in stocks to buy assets in a company, we buy stocks because we believe the company can grow and increase. I didn't buy APPLE stock to have assets in their computer servers. Owning the companies assetts is not a requirement.
If people read your interpretation and leave thinking they wont have pay zakat at the time of sale thats wreckless and they could be committing sin. I’d rather go with the established Ummah majority and what has been understood for centuries than your fringe opinion.
Not paying zakat can even be considered Kufr.
“ Those who give not the Zakât and they are disbelievers in the Hereafter. “ Fussilat 41:7
JazakAllah
good video, would like to heard your thoughts on NFTS
I have a video on them. check it out.
What if you regularly come in and out of equity positions (long positions only of course) during the zakar year? Let's say you do so to benefit from price mismatch or supply/demand constraints. Is the underlying cash value still exempt given your hypothesis? Thank you
Cash needs to remain idle for 1 lunar year. The argument I'm making is that allocating capital to productive enterprises is employing this capital (no longer idle).
Jazak Allah Khair brother Rakaan, we as Muslim Ummah are in so much need to people like you who understand the real fiqh of our Islamic teachings and apply them in our contemporary issues.
I totally agree with your judgement, and another example using the same logic is rental property (houses, flats, etc..) You pay Zakat on the rental income amount after adding it to your wealth if the total reaches nisab and completes Hawl.
If Zakat is payable on the whole asset value, you may have to sell the house to pay its Zakat if the rental amount was less than 2.5%, (for example rental voids for part of the year) which does not make sense. Eventually the whole value of the property will be eaten up by Zakat, which is against the real spirit of Zakat in my humble opinion, and Allah knows best.
Keep up the great work you always do, and God bless you.
Thank you! The rental property analogy is quite clear. Further, if a rental property is divided into shares and sold to the public, it essentially becomes like a stock. Since the asset itself hasn't changed, it makes sense that the same rules should apply.
Cash is zakatable whether you keep it at home or in an Islamic bank, even though it is useful (not idle) when it’s in the bank. So, no, the fourth condition is not just idleness. Moreover, all imams agree on zakat aroud al-tijara, which is exactly what stocks are.
How is money sitting at the bank or if your house useful? It only benefits the bank because in reality they are using it without your permission but if bank’s were what they are supposed to be your money would be just collecting dust under their protection that’s all, also don’t say that all imams agree on Zakat because that’s actually not correct that’s why they have convections and meetings to agree and share opinions
@@MariAm-tc9xm Islamic banks invest my money and we share the profit/loss. You don’t seem to know what an Islamic bank is. Perhaps this concept doesn’t exist where you live, understandably. About zakat oroud al-tijara, I know what I said exactly. So, please be specific in your argument and don’t throw in general statements. Name a scholar who says oroud al-tijara isn’t an obligatory type of zakah.
@@ramyomar in the gulf countries where I live we have Islamic Banks, and I can assure you that my money in my bank account is just sitting there and no one is sharing any profit or loss, regarding the Zakat on business unfortunately I can paste links on this text but just write Zakat on stocks and you will see each scholar saying something different, some they say you must pay 2.5% other 1% others even 0.5% and now here seems to be that we don’t have to
mashallah, thanks brother. Please state if zakat is payable on stock options?
See my video on stock options first.
Salam, Thank you brother, i have two sub question, i am a heavy stock investor what a can save i only buy shares out of it, i always pay 2.5% of there cmp, every Ramadan. Because i always took it a cash in other form, so u mean that is not case, also if we have 2 house one we stay and one is just lo ked say like summer/winter home i.e idel then based upon yout theory we have to pay zakat in it, pls help
What about options? Selling cash covered puts, do I pay zakat on it ?
Brother has your opinion on Bitcoin changed since last year? Question from an investor.
Is there anywhere I can study the details of zakat with all the evidences? I’ve had the same thinking for a while but all the scholars I’ve asked have told me I’m wrong. But to me their standard view doesn’t make sense as you explain.
If selling your stocks diminishes the business, then we can start the debate. But since it doesn’t, pay your zakat, brothers. Pay your zakat.
"but since it doesn't" requires some more thought. Ask any business owner if they would be ok with all their stockholders selling their stocks.
@@practicalislamicfinance It only affects the ability of the company to borrow i.e. the interest rates would be high. A stock sell off does nothing to the business. Now if we’re talking about a company with a burn rate and requires continuous funding to survive, then yes, a stock sell off would be devastating but I think that’s a different conversation altogether. Also, just as selling a stock doesn’t diminish the business, buying a stock doesn’t help it either (with exceptions i.e. IPO’s and such.)
@@jojovaldez7628 it would also affect the ability of the company to raise money (through stock issuance) and to attract and retain talent (through stock options). Funding a business, attracting and retaining talent are quite important for any company's survival regardless of its stage of development.
Also, why are companies with a burn rate a different conversation? are you suggesting that stocks are not zakatable if the company is cash flow negative?
Assalamualaikum brother
Do u know if it is halal to buy fractional shares
And is it okay if I invest in etoro ?
Please reply if you have seen my comment.😇
“Imposing zakat on stocks would be taking wealth from the more efficient for-profits and funneling it to less efficient government or nonprofits.” No it doesn’t bro. You can sell all your stocks and the company will not lose a single dollar. And so for that reason, I’m out. I mean, I will pay zakat on my stocks.
you can disprove this by taking it to its logical limit. Imagine noone held stocks at all. Would this impact companies?
@@practicalislamicfinance I think your point is that if no one held a stock, then the company wouldn’t exist. That’s true. But selling a stock doesn’t destroy the stock into non existence. It just transfers hands. So again, selling your stocks does not take wealth from the company. In fact, even if you own 100% of the company, and you sold all your stocks, the company would still exist. The new owner would still have to close it down if he wanted to destroy it.
@@jojovaldez7628 no this is not the point. if the price of a company's stock tanks, this directly impacts its ability to fund itself and attract and retain talent. This hinders its ability to grow even if it doesn't kill it off altogether. If you think about the impact of one investor doing this, you'll probably come away with the conclusion that it doesn't matter and you'd probably be right although not always (imagine Elon musk was Muslim and sold 2.5% of his Tesla stock every year). The impact becomes much clearer if we think about it as a policy for the entire Ummah to follow, then it's clear the capitalization of companies would definitely be impacted for the worse.
@@practicalislamicfinance If Elon Musk and others like him became Muslim and donated 2.5% of their stocks to charity, we could eliminate poverty.
@@practicalislamicfinance
Okay in that case, raw cash is also not zakatable because if all cash seized to exist, it would impact companies.
Assalamualaikum warahmatullahi wabarakatuh
Okay so I wanted to know if swing trading stocks is haram or halal
Many RUclips videos said it is halal and the choice of companies depends on certain criterias one of them being
30% or 33% comes from the scholars just to make an exception to accomodate with the current situation of the world finance, The thresholds and calculations differs depending on which Shariah body you use, no explanation in the Quran.
3 things to consider : Interest - bearing debt, Interest-bearing investment, liquid assets /Illiquid assets .
A company 's debt cannot be more than 33% of its market cap.
Interest generating assets myst be less than 33% of its market cap.
Money owed by other to the company must be less than 82% of a companies market cap.
That being said
No matter the % amount of interest....it's still interest right? So I wanna know how are scholars saying that it is permissible to do such a thing
Any Qur'an verse or Hadith would help me
I have also had doubts on dropshipping but it got clarified as there was a hadith on the sale of dates 2-3 years prior for the dates to become ripe
Anyways would appreciate it if you help me out with this
Jazakallah khair
I wish i knew this 5 years ago
Okay so if I have a television or a chair or table that I don't use it for a year does zakat apply on it. I think no. Sir may be you need to rethink on this condition. Secondly one can't track if a certain gold coin has passed the threshold of a lunar year so if someone has millions of gold coins how can one keep track of it so the most easiest thing since the Deen is not meant to be made difficult for the mankind is to give 2.5 percent or whatever zakat as per shariah principles. Moreover there is a hadith that says my ummah as a whole will not consensus on something that is not haq. So I think we should go as per consensus of the ummah which is right.
Sorry bro, but i would not recommend to come to your own conclusions and try to create ways to avoid zakat. You are not a scholar and i would be Cautious with Interpretation on your own understanding.
Would have been much productive and constructive if you mention explicitly where you think he is wrong. This way we cann all benefit.
The first thing he said at the beginning of the video is that this is just he’s OWN opinion, so you don’t have to listen to it if you don’t agree, also instead of telling us the evident (he’s not an scholar etc) could you tell us exactly where you don’t agree and why? Maybe we could benefit from your knowledge
Hes not trying to create ways to avoid zakat, thats a wrong mindset
this same logic applies to the Staked crypto or crypto locked in liquidity pool, they may expand to the money in banks as the banks theoretically extract value from it by investing, not expert at all but I feel this approach may open rabbit hole to other cases.
Also the intention aspects for me I use the options of my company as a way to save money, not to help the company to be honest
Ownership in a productive business and idle money in the bank are not the same. Its a weak comparison.
@@somo1757 my point is not about this comparison itself, my point is about the intention "al Nyah", I checked another Fatwa, in islamweb which is in arabic , it has 2 types based on the intention 1 , if it is to get dividin and take profits Zakat will be only on the gains and the profits not on the stocks itself, second if the the intention to trade the whole stocks owes Zakat of 2.5%
@@somo1757 Idle money in the bank is not actually idle. It is being used productively by the bank.
Muslim scholars believe stocks and investments are most appropriately categorized as "the produce of plowed land," as both are "productive capital" assets which yield gains. Accordingly, zakat is due on the gains of such "productive capital," not the "productive capital" itself. As for the rate of zakat applicable to stock investments, the following hadith offers guidance: The Prophet (Salla Allahu Alayhi wa Sallam) said: "On a land irrigated by rain water or by natural water channels or if the land is wet due to a nearby water channel, ushr (i.e. one-tenth, 10%) is compulsory (as zakat); and on the land irrigated by the well, half of ushr (i.e. one twentieth, 5%) is compulsory (as zakat on the yield of the land)."
The hadith makes reference to a zakat rate of half of ushr (5%). However, according to scholars, this rate is not appropriate for investments like stocks as it is possible to clearly calculate net gains. Thus, the full (10%) rate is appropriate.
I personally pay 10% on all dividends every year and when I'll withdraw from my account I'll pay full zakat rate on each distribution
most suggestion are 25% for stocks
meaning about 2.5% from 25% of stocks value
"Completely disregard their Ijtihad, and call Taliban upon them"
💀
This brother has got some real humour.
What about btc? Is it Jakatable? This is really important to know. Many would benefit if you could answer kindly.
Absolutely.
@@practicalislamicfinance
Do have a link to the video on insurance???
Hmms, the jewelry that women own , they have to pay zakat on that every year, no?
Bro don’t make it over complicated for yourself and others. Stock shares at any given time if I ask you what would be the useful value of them, answer would be “they are worth.. e.g USD 1k, 10k, 15k etc.” then you definitely need to pay zakat on them every lunar year, if more than Nisab value. Thank you, and Allah knows best.
This logic would make rental properties occupied by tenants zakatable. You should strive to make things as simple as possible but not more than that.
rewatch video.
@@practicalislamicfinance Simple logic. Stocks are used for investment/trading on the (trade markets). Properties other than your need if you intend to use them for investment/business/buying/selling/renting out, will be zakatable too after deducting the maintenance expenses from it. Allah knows best.
I agree @mafdalm
@@afzalmalham not true. If you’re renting out a property you own you don’t owe zakat on it. Your attempt to simplify is causing you to err in your conclusions. Like I said, simplify as much as possible but not more than that.
Omg