(1) Is zakat payable on business? If so, how does one calculate the amount? I have overdrafts and loans in business too, as well as receivables outstanding.
(2) Is zakat payble on stocks? I have stocks from various periods starting from 30 days to over 365 days. There are certain stocks which are not sellable anymore.
A. First of All, you should set a particular date of a lunar month for the valuation of your assets for the purpose of zakah. Better you choose the first of Ramadaan for this purpose, because this is the date on which the government also collects zakah from all the citizens. This date will be your zakah valuation date for each year as long as you remain sahib-e-nisab (the one on whom zakah is obligatory).
Then, you should calculate the value your zakatable assets as it stands at that valuation date. The zakatable assets are the following:
(i) Cash (including the balance of your bank deposits) at that date.
(ii) The market value of the shares of joint stock companies of NIT units or mudaraba certificates held at that date.
(iii) Face value of the financial papers, like bonds, KDCS, NDSCS etc.
(iv) The whole-sale value of the balance of stock-in-trade (including raw material) at that date, irrespective of the period of their retention.
(v) Receivable amounts (book debts) as on that date. From the total amount of the aforesaid assets, the following amounts may be deducted:
(i) Amounts payble to the suppliers of stock (including raw material)
(ii) Amounts payable at that date a rent to the landlord or to the lessor if equipment is acquired on lease.
(iii) The Principal amount of loans borrowed from financial institutions and employed in acquiring zakatable assets, or any personal loans.
(iv) The amounts deducted by the government at source as zakah.
After the deduction of these amounts from the total value of the zakatable assets, as mentioned above, the balance will be your zakatable value. 2.5 percent of this zakatable value is payable as zakah.
The period of retention of the stock is not material. The balance standing at the date of valuation shall be valued, no matter whether some stocks are acquired some month ago, and some are acquired just one day earlier. The completion of one year is needed only for the minimum amount of nisab. If somebody has been owing the minimum amount of nisab for the most parts of the year, he has to pay zakah on the balance remaining with him, on the date of valuation. ‘Retention for one year’ is not necessary in respect of each and every item. Therefore, whatever comes or goes during the year has no bearing on the calculation of zakah. It is only the balance remaining on the valuation date which is subject to zakah.
You have also asked about the stocks which are not “sellable any more”. If you mean that these stocks are kept for personal use or for charitable purpose, they shall not remain zakatable any longer. But if you mean that they are available for sale, but nobody comes forward to purchase them, they are still zakatable. However, it should be remembered that zakah can also be paid in kind, therefore you can pay their zakah from those assets themselves i.e. you can give 2.5 % of those stocks in kind to a person entitled to receive zakah.