Hello,
I know we have to purify the dividends received from companies but what about purifying the stocks that we are just simply holding and not selling at all?
Thanks,
-Adam
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I am also wondering regarding this. But based on my own due diligence Zakah on Shares:
- 2.5% x (Total Current Assets - Fees)
- If you Qiyas it to Agricultural Land - 10% x Gains
There are others but based on consensus Number 1 is more popular and I prefer number 2. In Reference 2 they summarize the study that the Current popular consensus needs to be analyze based on investor’s Niat. Thus propose the second method as it is the second popular consensus. Kindly read my references and talk to your nearest Zakat Foundation. Reference 1, I don’t know who are they but for reference 2, they were made by Malaysians (Sunni - Shafi’i). Thus can be referred to any Sunni Islamic Financial Scholars or Advisors.
There are other types and one most notable for me would be Mufti Abdur-Rahman Ibn Yusuf, check the link to his Youtube video regarding zakat, he is Sunni - Hanafi, so If you’re Hanafi, no problem insyaallah.
Reference
Salaam Adam,
Welcome to Zoya Community!
I am a research analyst with Zoya and I have looked into this matter. According to AAOIFI, if it has been over one financial year since you have held the shares although you are not willing to sell them, you will have to purify it.
Even if you are not selling those shares they are at-least generating revenue and that has to be purified.
In one of the academic articles about purification, it has been mentioned that, “If the stocks are held for trading purposes (and have not received dividends),to dispose of the interest earned by the Company, from holding period, as a percentage of the stock price.” (Gamaleldin, F. M. (2015). Shariah-Compliant Stocks Screening and Purification)
This stock holding for the purpose of sale with decided intentions to sale are subject to Zakat. Preferably on whole sale price, whereas it is permissible to calculate the value of stock as if it was being sold as lump sum.
If the stock holding is of Mashbooh in nature, having not clear status or have both identifiable characteristics between Mashbooh and Halal. Then the Mashbooh portion of holding must be purified by deducting the portion of income earned from identifiable mashboob portion.
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Wsalam Areeba, what if it has not been a year since you purchased the holdings?
Salaam,
If it has not been a year since you have purchased the holding then it is not obligatory on you to give Zakat this year. You will have to calculate the Zakat from next year InshaaAllah.
Got it but I am confused. Purifying the stocks is different giving zakat on it, right?
That’s my understanding right now. Money that you donate as a result of purification is neither zakat nor sadaqah.
Right. But I was just confused because I was talking about purifying the stocks that I hold on too long term and not paying zakat on them. So I was confused why Areeba said Zakat…
So the reason why we pay out Zakat is to purify our earnings that’s why I mentioned Zakat, kindly refer to this link wherein it has been explained how to purify your investment. How to purify your investment ?