It is the holy month of Ramadan and Muslims all over the world are busy doing good deeds.
Zakat is a financial worship and one of the five pillars of Islam. All Muslims who are sane, free, have reached the age of puberty and have money or goods which are yielding them more than their debts or are equal to Nisab are required to pay Zakat.
Nisab is the minimum criterion for wealth in Islam and refers to those having at least one of the following:
- 7.5 tolas of gold or its equivalent in money;
- 52.5 tolas of silver;
- 40 sheep;
- 30 cattle;
- 5 camels.
This Zakat is to be given to all those Muslims who are poor, needy or in debt. It cannot be given to one’s own parents, siblings, grandchildren or non-Muslims. However, you can give charity as Sadaqah to help them.
Below we have created a guide to how Zakat can relate to your real estate investments.
- All real estate investments not included for personal use are to be included in Nisab when calculating Zakat.
- If your real estate property is for rent, then you must pay 2.5% of the gross annual rent as Zakat.
- All properties in which real estate agents invest are subject to Zakat, except the office they work in and the house they live in. It is obligatory for them to pay Zakat after one year, after deducting debts as 1/40.
- Regardless of the property value depreciating or appreciating over time, the Zakat has to be paid on the value it is worth at the end of the year.
- Agricultural land is absolutely exempt from Zakat, even if it is worth millions of dollars. However, Zakat is determined from its produce. If the land is irrigated naturally through rain, the Zakat would be 10% of the produce and if it is irrigated artificially through tube wells it would be 5% of the produce of that land.
Calculate your Zakat and try to give others as much as you can during this holy month.