Overview
To pay Zakat on the property is indispensable as Zakat is one of the pillars of Islam. The Zakat is given to those who are poor, needy, employed to administer Zakat, enslaved, debtors, and reverted to Islam. Zakat is paid in line with the lunar calendar.
You don’t need to pay for Zakat only during Ramadan. You can pay Zakat whenever you want during the year. Many people know that Zakat is paid in gold or money. On the other hand, the majority of us need to know Zakat on property.
This blog is entirely for awareness purposes so that people may learn about zakat on property. Let’s talk in detail about zakat on property.
Verse from the Quran –
“And establish prayer and give Zakat (Charity), and whatever good you put forward for yourself – you shall find it with Allah.” (2:110)
Saying of the Prophet Muhammad (Peace Be Upon Him)
Narrated Abu Huraira:
The Holy Prophet (PBUH) said, “Whoever is bestowed with wealth by Allah and doesn’t pay the Zakat of his wealth, then on the Day of Judgment his wealth shall be made like a bald poisonous male snake with two black spots over the eyes. The snake shall surround his neck and bit his cheeks and say, ‘I am your wealth, I am your treasure.’”
Importance of Zakat in Islam
Islam has five pillars, and Zakat is one of them. Zakat is the indispensable amount that every wealthy Muslim has to pay as an obligation to Allah. Zakat purifies your soul as well as cleanses your wealth.
Benefits of Zakat:
- Lucrative Investment with Allah
- Proximity to Allah
- Cleaning of Wealth and Soul
- Absolution of Sins
Percentage of Zakat for Real Estate – Zakat on Property 2024
Zakat on investment opportunities, including residential, commercial, and land, calculates at 2.5% of the market value. For instance, the Zakat shall be 175,000 if the property value is 7,000,000. Thus, the Zakat only applies if the property value surpasses the threshold (Nisab).
To Whom The Zakat Is Given?
The Zakat is given to those who are working for the sake of Allah, people who are in debt, enslaved people, and stranded travelers. Furthermore, you can distribute the Zakat among those who are poor and don’t have resources. Moreover, you can give Zakat to your impoverished relatives. Also, the Zakat is given to those who revert to Islam.
Criteria for Determining Zakat Eligibility on Real Estate
The criteria for determining zakat eligibility in real estate are easy to understand. Let’s understand it with an example. For instance, if you are acquiring a plot with the intention of selling, and you sell the plot when the price increases, 2.5% zakat will be paid for whatever the plot current amount is. However, if you acquire a plot for the intention of accommodation or personal use, you will not have to pay the Zakat on it.
Furthermore, if you have given a home for rent to a tenant, you are saving money. After one year, if the net rental income surpasses the threshold (Nisab), you will have to pay 2.5% Zakat based on the net rental income. But if you have used the rental income and haven’t saved it, then no zakat will be paid for it.
Method for Calculating Zakat on Real Estate in 2024
The Zakat on the real estate shall be calculated as 2.5% of the market value rate of the land. For example, if you have a commercial property worth 8,000,000 and one year has passed, you must pay 2.5% (200,000) on it.
Market value rate of the land * 2.5% = Zakat Amount
Net Rental Value * 2.5% = Zakat Amount
Types of Zakat
There are two types of Zakat: Zakat Al-Mal and Zakat Al-Fitr.
Zakat Al-Mal
Zakat Al-Mal is paid when a Muslim’s wealth touches the financial threshold (Nisab) amount. Furthermore, it is paid anytime during the year.
Zakat Al-Fitr
This Zakat is paid before the Eid al-Fitr prayer, and each family member’s head pays for it. Zakat Al-Fitr is the price of each meal – the minimum is 380 rupees.
Zakat on Personal Use Land or Accommodation
Zakat is not paid for those who have a property for their personal use or accommodation; in this case, the property is considered for individual use, and there is no Zakat on personal property, per the consensus.
Zakat on Land Holdings 2024
At the time of purchase, if you intend to keep it only for personal use, you are not allowed to pay Zakat for that property. Thus, Zakat is not paid on land holdings for personal use.
Zakat on Renting Property 2024
Zakat is not implemented upon those who rent their houses, buildings, hostels, high-rise buildings, warehouses, etc. The reason is that the money generated by these real estate dwellings is used side by side by the owner.
On the other hand, according to many scholars, if the owner has been saving the rental income and touches the threshold (Nisab) and one year has passed, then the owner will have to pay the 2.5% Zakat on the net rental income.
Zakat on Mortgaged Property 2024
As far as the mortgaged property is concerned, Zakat is not paid for it if it has been for personal use. But if the property is mortgaged for the intention of trade, the Zakat should be paid on it.
Shaykh Ibn Baz Said:
If you have mortgaged your property for trade, you must pay Zakat. But if it is vise-verse, you are exempted from paying Zakat. (Fatawa Nur’ala Ad-Dard, 15/43)
Zakat on Plot of Land
Regarding Zakat on the plot, if the plot has been acquired for residential purposes, the zakat is not paid on it. However, if the plot has been acquired for investment purposes, the Zakat is paid for every year in accordance with the market value of the plot.
Zakat on Loan
As far as the Zakat on loan is concerned, it has two categories, including
- Secured Loan
- Unsecured Loan
Secure Loan
In this case, suppose you have given money to a rich person who needs it and he promises you to return it one or two years later; then you will have to pay Zakat on the secure loan as you are assured to get your money back from the person whom you have given money.
Unsecured Loan
On the other hand, if you have given money to a poor person, and you are not assured of getting it back, then Zakat will not be paid on it, but if the person pays you back, then you will have to pay Zakat on the unsecured loan.
Conclusion
To pay Zakat on the property is a mandatory obligation in Islam. Furthermore, it is valid not only for immovable commercial but also for investment properties. The team of Orion Enterprises has researched and gathered necessary information regarding Zakat on property.
We recommend consulting with a professional Islamic scholar or financial advisor to learn more.
Waseem Ali chose writing as his career after completing his M.Phil. in Communication Studies from Communication University of China (CUC). With a research-oriented approach, he currently works as a research content writer with us. He enjoys research, insightful studies, and traveling.