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Ushr On Rental Income
Assalamu ‘alaykum,
I’ve heard shaykh Ghamdi explain that ushr applies on income of rental property. There are many questions that follow from this:
1. Is it on gross (rent received) or net yield (after expenses and mortgages)?
2. Is it full or half ushr, because there is substantial work (equivalent to irrigation) involved in managing rental property.
3. As rental income often then becomes savings, does zakah apply again on the same money on which ushr has already been paid?
4. Do we really deduct taxes also in non Muslim countries?
5. Apart from shaykh Ghamdi, which other scholars have taken this view of ushr for rental income?
I’ll be much obliged if you could get me the answers to the above.
With much love and salaams,
Naved
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4 Replies
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Ushr On Rental Income
updated 3 years, 7 months ago
3 Members
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4
Replies
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1. Yes, principally, it is on Gross Production. However, in case of mortgage, if payment relates to the same property, it can be deducted, since it relates to securing ownership of the very property thus making it an inevitable means of production. For industrial production, its Zakat as per Ghamidi Sahab should be based on value addition only. Please see:
2. If it involves actual labour, then 5% would be applicable on rental income as Zakat on Production. It is for the person to decide considering the nature of labour he or she is expending in managing the property.
3. There are two major domains of Zakat namely Wealth and Production. For production, zakat applies on gross amount as soon as production happens, while for wealth, zakat applies once a year on a fixed date on all the wealth (excluding exemptions). This is as per established Sunnah of Prophet (SWS) for wealth and Production. When production happens, the zakat becomes due immediately on the gross amount (irrespective of the fact when one actually pays it). After payment of that Zakat, whatever left is one’s wealth. And if that wealth still stays with the person till the year-end i.e. the date fixed for payment of Zakat on wealth, then the whole wealth is subject to Zakat (that production earning as well which has become wealth of a person now). If one spends the same wealth one day before the year-end date, then there is no wealth zakat on that wealth. Both these heads are subject to Zakat only if they reach the set Nisab for Zakat Obligation.
4. Yes, all taxes paid to Government (Muslim or Non-Muslim) can be offset against Zakat Liability.
5. This matter is based on ‘ijtihadi ihaaq’ done by Ghamidi Sahab, considering the nature of different sources of income and how they correlate with each other.
For detailed FAQs covering all these topics, please see:
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Assalamu ‘alaykum,
I have an important follow up. If the rental income is $85,000 and the mortgage is $30,000, but the tax paid on this is $6,000 what is the correct calculation? Do we calculate ushr first and then off set with the tax paid (so the ushr at 10 percent is $5,500 but we’ve already paid $6,000 in tax, so nothing further to pay) or do we use the tax as an expense (so the ushr is on 49,000 now, because the 6,000, is just an expense so a further 4,900 to pay)? This is a significant difference, and depends on whether the tax is offset against ushr liability or is just an expense. Please clarify.
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You subtract expenses from your rent and then pat zakat on the rest.
Please enter appropriate numbers in our Zakat Calculator after reading description for each box. When you reach the end, it will generate a statement showing you exactly what you owe after any applicable deductions, and what percentage was applied to what. It’s also a great way to learn the sharia of zakat.
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It is a better to actually learn the principles rather than refer to a calculator. The answer to my query is that the tax paid should be offset against zakat liability, not taken as an expense. This is how the calculator is showing the calculation. Hence in the example where the mentioned tax has already been paid on the said rental income, no further ushr is due.
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