Q. 1. We have a retail shop at a rented premises. We have paid a huge amount for its “goodwill” when taking its possession. The question is whether Zakah is payable on the value of the goodwill which has now increased considerably? If zakah is payable on the goodwill, should we pay it on its original value or on the present value?
A. No Zakah is payable on the value of the goodwill of a shop.
Q. 2. We have some stock in our shop along with some fixtures, furniture, etc. We have some cash-in-hand, some bank balance, some receivable amounts and some payable debts. On what assets out of these categories should we pay Zakah and at what rate?
A. Zakah is not payable on the fixtures and the furniture of the shop. You should pay Zakah only on the stock, cash-in-hand and on your bank balance. The amounts receivable from your customers are also liable to Zakah. You can pay Zakah on these receivable amounts either at the end of each year or after you actually receive them from your debtors. But in the latter case if you receive these amounts after more than one year, you will have to pay Zakah for all the preceding years also. So, It is more advisable to pay zakah of all the receivable amounts each year togather with the other Zakatable assets.
The rate of Zakah in all these assets (i.e.the stock, the cash in hand, the bank balance and the receivable amounts) is 2.5 percent of their value.
As for the debts payable to creditors, you can deduct their total amount from the value of your zakaatable assets, Zakah not being payable on these liabilities.
Q. 3. What should be the basis of our stock for the purpose of Zakah? Should we calculate the value on the basis of our cost price or on the basis of the present market price?
A. Zakah is always payable on the current market price of each zakaatable assets.
Q. 4. On which of the following assets of an industry, Zakah is payable? Land, building, machinery equipment, warehouse, raw material, finished goods, cash in hand, bank balance, amounts receivable, transport vehicles?
A. The following assets of an industry are subject to the obligation of Zakah: a) raw material b) finished goods c) cash-in-hand d) bank balance e) amounts receivable, subject to the details given in answer to the question no.2.
The following assets of an industry are not subject to Zakah unless they are purchased with an intention of selling them again: a) land b) building c) machinery / equipment / fixtures and fittings d) warehouse e) transport vehicles
Q. 5. Can the amount of loans taken by an industry from the banks be deducted from the value of zakatable assets?
A. The general principle is that all the loans payable can be deducted from the value of zakatable assets when calculating the amount of Zakah. But in modern conditions, if the amount of the loan is utilized in the construction of a building, or in the purchase of machinery or in the purchase of any other asset exempt from zakah, like fixture and furniture, the amount of such a loan should not be deducted from the total value of zakatable assets.
Q. 6. We have some export licences and some import permits. They are either obtained from the government free of charge or purchased from the market. These permits and licences have value in the market which fluctuates according to the market forces. Should we pay Zakah on the value of such licences or permits?
A. Zakah is not payable on export or import licences.
Q. 7. According to the general practice Zakah is paid during Ramadan. The question is whether it is necessary to pay Zakah in Ramadan.
A. Zakah should always be calculated on the basis of the lunar calendar. Every person has his own Zakah valuation date which he must know. It is the date on which he, for the first time, acquired the ownership of the nisab (minimum quantum) of Zakah, i.e. the value of 613,35 grams of silver. For example, you have acquired the ownership of 613,35 grams of silver for the first time on the first of Muharram. The first of Muharram is your valuation date for the purpose of Zakah. You should calculate the value of your zakatable assets owned by you on that date every year. The amount spent before that date need not be included in the zakatable assets. Only the balance remaining with you on the valuation date is subject to Zakah. If you do not remember the exact date on which you became the owner of the nisab for the first time, you can estimate the valuation date. Therefore, the month of Ramadan is not the valuation month for everybody, the valuation date differs from person to person. However, once the amount of zakah is calculated on the basis of correct valuation date, it may be paid any time after the valuation date. But the payment should not be delayed unnecessarily.
Q. 8. We pay income tax and wealth tax regularly. The rate of wealth tax often corresponds to the rate of Zakah. Can we deduct the amount of such taxes from zakah?
A. The payment of government taxes cannot discharge you from the obligation of Zakah. However, if you have paid the taxes prior to Zakah valuation date, as explained in answer to the previous question, the amounts of taxes so paid need not be included in your zakatable assets. But if you have not paid the taxes upto the ‘Zakah’ valuation date, even though they have become due, you cannot deduct the amount of taxes from the zakatable assets.