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ZAKAH ON THE EMPLOYEES PROVIDENT FUND PDF Print E-mail

ZAKAH ON THE EMPLOYEES PROVIDENT FUND

Q: 6- In Malaysia, 20% of monthly salary is paid to the Employees Provident Fund which keeps and manages the funds for us until retirement age. We are not allowed to take the money before retirement except in the case of death of the employee where it is paid to the heirs. How do we treat this asset in the payment of zakat?" (Ibid)

A: If 20% of the salary is deducted at source without giving this amount to the employee, zakah is not payable on the amount kept in the Employees' Provident Fund until the same is received by the employee. When an employee receives it on his retirement, the amount so received shall form part of his zakatable assets of that year only, and such part of it as is not spent before the valuation date shall be subject to zakah, and zakah will be payable on the aggregate balance of his assets (including the balance of the amount received from the Fund) on the valuation date.'

Contemporary fatawaa

 
ZAKAT ON THE TRUST FUNDS PDF Print E-mail

ZAKAT ON THE TRUST FUNDS

Q: 5- 'Instead of our managing a portfolio of shares, we have invested some spare cash in some trust funds i.e. private ones and also those set up by the government. The price of the fund is closely linked with the index of quoted shares and the price is given each day. Dividends are also declared and given each year.

Do we have to treat this as cash and pay zakah on its market value or only on its dividends? In this case the dividends should be enough to cover for the zakah of 2.5% of total market value, therefore, it would not cause undue hardship as we do wit have to sell the capital portion to pay the zakah." (Ibid)

A: A Trust Fund is a mutual fund where a portfolio of the shares of different listed companies is maintained. The share of a participant in such a fund is represented by a negotiable instrument usually called a 'unit'. These 'units' represent their holders' proportionate share in the portfolio, and ultimately a proportionate share in different companies, as well as a proportionate share in the capital gain the portfolio earns. Thus, a unit of a "Trust Fund" does not represent cash only, like the bonds, but it represents a proportionate share in the assets of the relevant companies also. Therefore, it will be treated like a share of a quoted company for the purpose of zakah, and all the rules mentioned with regard to the shares of a company are also applicable to the 'units' of a Trust Fund. Therefore, zakah  will be payable on the market value of such units, irrespective of the amount of dividend declared on them. It is like the stock in trade on which zakah is payable on the basis of its market value, irrespective of the rate of profit earned on it.

Contemporary fatawaa

 
PAYING ZAKAH TO AN INDEBTED PERSON PDF Print E-mail

PAYING ZAKAH TO AN INDEBTED PERSON

Q : 3 – “A businessman sufferd a loss in his business. He sold all his properties and paid his debts. He hired a house on rent and shifted from a posh locality to an ordinary locality in a far off area of the city and joined a service. From appearance his standard of living still looks like his previous one (although he is without a car, telephone and other luxuries). He is still under the debt of approximately Rs. 2 million. He pays some amount every month from his salary to his creditors. Now, the question is:

(a) Can his debts be cleared by Zakah money?

(b) If it is permissible, should we pay his debts directly to his creditors, or should we pay him first and then ask him to payoff his debts?

Please also note that this businessman has to receive about Rs. one million from other people which is being received by him in parts and after long intervals.

(c) Is it necessary to tell him that it is the Zakah money or can we pay him without any reference to Zakah, because he may feel humiliated if we tell him that it
is a zakah money?

(d) If he pays some or all of his debts by Zakah money, then he again becomes a rich man, should he return the money of Zakah to its original owners, or can he
pay it to other poor people, or he need not do it? (Ibid)

A: (a) The principle is that if the debts of a person are equivalent to his surplus assets (including his receivables) or are more than that, he is entitled to receive Zakah. Likewise, if his surplus assets are sufficient to clear his debts, but after paying his debts, his remaining surplus assets do not reach the quantum of nisab he can also receive Zakah. However, if his surplus assets are such that even after clearing all his debts, they are equivalent to or more than the nisab, he cannot receive Zakah.

It is worth mentioning that the term "surplus assets" include money arid all those household goods and properties which are not required for his day-to-day needs.'

In the light of this principle, the businessman under question can receive zakah, because his debts are 2 million while his surplus assets (including his receivables) are less than that. Therefore, one can help him in clearing his debts out of the Zakah.

(b) If his debts are intended to be paid out of Zakah, the creditors should not be paid directly. Instead, money should be given to the indebted person who will pay it to his creditors, if he so wishes.'

(c) It is not at all necessary to tell the beneficiary of Zakah that he is being helped out of Zakah. One can give him the amount as a gift or as a present without referring to Zakah. The only condition is that while giving it to him, one should have a clear intention in his heart to pay Zakah. Even if a person gave money to the beneficiary as a qarz or a loan, while in fact he intended to pay Zakah and never intended to get it back from him, the obligation of Zakah is discharged. However, if he comes thereafter to repay the loan, he should refuse to accept it.

(d) Once a person has received Zakah while he was entitled to receive it, he is not required to return it to the original payer, how rich he may become later .. Therefore, if that businessman becomes rich once again, he is not required to pay back the Zakah, neither to the original owners, nor to other poor people. However, he will be required to pay his own Zakah according to his assets owned by him at that time.

Contemporary fatawaa

 
ZAKAH ON UNQUOTED SHARES PDF Print E-mail

ZAKAH ON UNQUOTED SHARES

Q: 4- "How is zakah calculated and paid on the unquoted shares which cannot be sold through Stock Exchange?" (Nafesa Raja Hong Chik, Malaysia).

A: Zakah is obligatory on the market value of the shares of every joint stock company. Although the market value of the unquoted shares cannot be determined through the Stock Exchange, yet there are two ways to determine their value.

1. Some unquoted shares are sold and bought through "over the counter" transactions i.e. by mutual agreement of the buyer and seller and without the mediation of a Stock Exchange. These "over the counter" transactions may determine the market value of the unquoted shares.

2. If the market value cannot be ascertained in this way for some reason, then the value of the unquoted shares should be calculated on the basis of the balance sheet of the company.

It has already been explained in Albalagh (June 1990 p.20) that a share holder can deduct from the Zakatable value a proportion equivalent to that of the fixed assets of the company.' The same principle is applicable to the unquoted shares also.

Contemporary fatawaa

 
PAYMENT OF SADAQATUL-FITR TO A NON-MUSLIM PDF Print E-mail

PAYMENT OF SADAQATUL-FITR TO A NON-MUSLIM

Q : 2 – Can the sadaqatul-fitr be paid to a needy non-Muslim?

A : According to Imam Abu Hanifah, the Sadaqatul-fitr can be paid to a non-muslim resident in an Islamic country if he does not own the nisab (a surplus amount equivalent to the value of 52.5 tolas of silver).

Contemporary fatawaa

 
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