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Zakat On Shares — Follow Up Question 2
Your reply:
‘Share is your participation in a pool of investments. Your share is your invested money. It is consumed, and then it is regenerated through profit…..Therefore, investment is not considered a means of production but means of productions are bought with it.’
When means of production are bought with money that is the literal definition of investment. Consider person A and person B are doing partnership by bringing 5 million each. They bought factory with 5m and plant with 5m. Now will person A and person B pay zakat on 5m ‘consumed’? The answer is no.
In summary:
Person A’s share of investment: 5m zakat: exempt
Person B’s share of investment: 5m zakat: exempt
Same thing happens when a person buys a share on stock market. He is basically investing in means of production of the company’s plants, factory etc. Please comment?
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5 Replies
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Zakat On Shares — Follow Up Question 2
updated 1 month, 2 weeks ago
3 Members
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5
Replies
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When you buy a a machine, you own it and it produces which you sell and make profits. You cannot convert your machine into money. This is not the case with investment. You don’t own a machine or thing. You don’t know if your money is used in buying a means of production or paid in utility bills, etc. You can take your money back anytime, according to the laws or SoPs. Therefore investment is not counted as means of production. Economics treat them differently.
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Salam, thank you for sharing your views on the topic. After Reading above comments my take home is ;
-Shares are “means of production” hence exempt from zakat.
-However dividends & bonus amounts are the profit and liable to zakat @ 10%. (as only investment and no effort involved).
-The tax on dividends paid to the Government can be considered zakat as long as it’s more than 10%.
Please correct me if my understanding is incorrect.
Thank you.
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Shares are of two kinds: Investment and means of production. Investment incurs zakat, not the means of production.
The amount for bonuses and dividends is yours, unless they are distributed. If they are with you, you have to pay zakat on them. The Tax on them will be counted as zakat paid.
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Thank you for the reply.
Please further clarify, What “type” are regular company shares traded on platforms like karachi stock exchange etc.
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This particular information is not available here. The one who goes to invest needs to investigate.
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