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Zakat On Rental Income After Deduction Of 20% Income Tax
Respected Ghamidi Sb. Salam, I am Dr. Javed Iqbal from Lahore, I served around 20 years in UAE. For the last ten years, I have been in Lahore. Today my only source of income is the rent from one commercial building. My tenants are two Limited companies. They deduct almost 20% of the rent amount to pay income tax to FBR on my behalf. The question is am I still liable for “Zakat” after a deduction of 20% of my rental income?
Thanks & Regards
Dr. Javed Iqbal
Lahore
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2 Replies
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Zakat On Rental Income After Deduction Of 20% Income Tax
updated 6 months, 1 week ago
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In that case, you are not liable to pay zakat on the amount of the rent.
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Zakat needs to be calculated for two heads separately:
1) Production Zakat or Earnings Zakat (which is the Monthly rent in this case) as soon as production happens and,
2) Zakat on Wealth or Zakat on Assets at year-end (Based on Year-end total assets value).
Taxes paid to the government can be adjusted against Zakat obligation. If the tax withheld by the companies is equal to or exceeds the above Zakat liability (1+2), then zakat would be considered as paid. Even the excess tax withheld can be carried forward to adjust against Zakat liability of the next year. Government taxes which can be adjusted include all forms of actual taxes levied by the government including but not limited to income tax, sales tax, property tax, wealth tax etc.
Please refer to the following summarized Law of Zakat for understanding of how both heads work:
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You may enter appropriate numbers in our Zakat Calculator after reading the 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 each category. It’s also a great way to learn the sharia of zakat.
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