Question 12 : Assalamualikum sheikh. I sold my house in August 2016 and bought a land to build my new house. My land title was delayed and had also some other issues with the land. The money to build the house was invested in September 2016. I do not know how much will be returns until August 2017. Am I liable to zakat on the invested money which will be used up now to build the house or I estimate the income and pay 2.5% on the returns. Please advise. Jazakallah khairan
Answer: Walaikumussalam Brother ,
As you know, two out of the four types of wealth on which Zakat is payable are (1) Gold, silver or currency, and (2) Items being traded in a business. Often the scholars use the Nisab, balance etc of one of these two types with the other type. So, when you received the house sale money in August, the twelve LUNAR calendar period begins at the end of which the 2.5% Zakat is due on that amount if it is kept for the whole year either as type one or type two of the two zakat payable types of wealth mentioned above.
In Sept 2016, you said you invested it. If this investment was to buy a house along with a friend sharing its cost together, as an example, then no zakat will be due on that amount since zakat is not generally applicable on homes. But of instead if your investment is of type one or type two, then zakat will be payable after 12 lunar months since August 2016 on the whole amount. A type one investment will be if you bought gold, silver or another currency (forex trading) with that money. Type two investment will be if you traded in stocks and bonds since they are effectively used as buy and sell items as they are also for the dividends. So if you invested the money in either of type one or two investment, then 2.5% zakat is payable on the entire amount 12 lunar months from August 2016. And of course as the Prophet (s.a.w) said, “No wealth decreases due to charity,” Allah will bless the amount given in zakat and return you better inshallah.
Lastly, as for the return on the investment, if it was a gradual relatively small increase throughout the year, then it wohld be similar to increase in lifestock situation amd you would give the zakat at end of 12 months from Aug 2016 on the entire amount including this gradual increase that waa born out of the original amount. But of on the other hand, the increase came in one go, or not gradually, yet ot was relatively substantial amount, then you can start the 12 month waiting period for zakat on that amount from the moment you get it.
So, to summarise, the zakat is payable on whole amount of it was invested in type one or two of types of zakat payable wealth. It will be due 12 lunar months from forst aquiring the wealth ie Aug 2016. But if it was invested in non zakat payable type of wealth such as joint ownership of a house, land, etc, then no zakat due on it. In all cases, Allah gives wealth as a test, increases its benefit if acquired and disposed piously, and its an eternal win in such a case. Barakallahu fee Deenikum wa Dunyakum.