Question :
I work in trade (merchandise trading), but I know nothing about zakat and its rulings, and I want to fulfill my zakat obligation.
The goods I buy may remain with me for a full lunar year, or I might sell them within three days. Some may get damaged and thrown away, and some might be returned to the supplier. Sometimes I pay for the goods immediately, and other times I pay after a deferred period as agreed. The prices also fluctuate—one day they are at a certain value, and a week later they may increase or decrease. This is the nature of trade and the market.
There is also money in the bank, some in cash, and some in the form of checks that haven’t yet been cashed. There are also debts owed to me in the market—some of which I may be able to collect, and some I may not. Likewise, I have debts to suppliers for goods I will pay for in the future, as well as other business expenses and taxes.
There are also assets I use for trade, such as a building I own (which may be of high value) and a rented property. I also use tools such as vehicles, trucks, and computers, and so on.
As for real estate, some of it is for trade and sale, while some I keep for rental income.
Additionally, I have my own personal wealth that is separate from the business, such as savings, my home (or even multiple homes), my personal car, and my wife’s gold jewelry, which she wears as adornment. I also own gold that I keep for saving.
So please guide me to what is correct—may Allah bless you. For indeed, the cure for ignorance is to ask. Please make the explanation simple so that I can understand it. May Allah reward you.
The Answer :
All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.
Trade goods are subject to zakat once a full lunar year (ḥawl) has passed over them. At the end of the zakat year, the merchant must appraise the merchandise intended for sale using the wholesale market value on the zakat due date, in the currency in which the goods were purchased. This applies regardless of whether the value has increased or decreased during the year. The merchant must also add to this the cash on hand that resulted from commercial transactions.
As for debts owed to the merchant, they are added to the trade assets:
If the debt is owed by a solvent debtor—i.e., someone able to repay upon request—then it is subject to zakat at the end of the zakat year, even if the creditor has not yet received the money. This is because it is considered owned wealth held by another party.
If the debt is doubtful or owed by someone who habitually delays repayment, then, according to the Shāfiʿī school, zakat is due for all the past years when the debt is finally recovered. This is more cautious and safeguards one’s religious duty.
According to the Mālikī school, zakat is due for only one year upon collection, and this is a more lenient position. It is stated in Mawāhib al-Jalīl (2/321):
“As for trade-related debt, there is no disagreement that it takes the same ruling as trade goods: the ‘manager’ (one who trades continuously) appraises it annually as part of trade assets; as for the non-manager, he pays zakat for one year only when he receives it, covering the previous years.”
Bank loans, on the other hand, are considered funds that the borrower has acquired with full ownership and the freedom to dispose of—whether by selling, gifting, investing in trade, or otherwise. Therefore, debt does not exempt the borrower from zakat liability. This is because zakat is tied to the actual wealth (ʿayn), while debt relates to one's liability (dhimmah); hence, one does not negate the other. Furthermore, the zakat-related texts are general in nature: once wealth reaches the niṣāb (minimum threshold) and a full lunar year has passed from the time the niṣāb was acquired, zakat becomes obligatory.
Debts owed by the merchant do not affect zakat liability, because debt does not prevent the owner from utilizing or growing their wealth. The same applies to tax liabilities:
If paid during the zakat year, they are treated as regular expenses and are not subtracted from zakatable assets.
If the year ends before they are paid, they are not deductible from the zakat amount.
Zakat on commercial wealth pertains to goods circulating in the market with the intent of trade—buying and selling. It does not include assets acquired for personal or operational use, such as delivery trucks, employee computers, or personal vehicles.
Likewise, real estate owned for rental purposes is not subject to zakat as a trade asset. Instead, the rental income is subject to zakat if a full lunar year passes and the amount reaches the niṣāb. To simplify matters, the merchant may combine this rental income with business profits, capital, collectible debts, and other incoming funds, and designate a specific day each year on which all zakatable assets are calculated together.
As for gold used for adornment, it is not subject to zakat unless it exceeds the customary amount. However, gold kept for saving or investment is zakatable if it reaches the niṣāb.
In conclusion, The merchant is obligated to appraise their trade goods at the end of the lunar year, valuing merchandise intended for sale at the wholesale price on the zakat due date. They must add to that any cash on hand and any collectible debts, as per the rulings detailed above. Debts owed by the merchant are not to be deducted. If the total value reaches the zakat threshold—the equivalent of 85 grams of 24-karat gold—then 2.5% of the total must be paid as zakat. And Allah Almighty Knows Best.
[1] "The manager evaluates it":
This means that the manager—someone who engages in continuous buying and selling like shop owners—estimates the value of the debt as part of the trade assets each year, includes it with the capital, and pays zakat on it as if it were already in hand.
[2] "The non-manager pays zakat on it once, when collected, for the past years":
This means that someone who does not engage in regular trading (a non-manager) does not pay zakat on the debt while it is still unpaid. Rather, he waits until he actually collects it, and then pays zakat once for all the past years in which he had owned that debt.
