Zakāt Ruling on Installment Money, Loans, and Business Income
Reference: Ahkam wa Masail, Zakāt Issues, Vol. 1, Page 270
❖ Background of the Question
The questioner is involved in the transport business. He has sold vehicles worth about 4 million rupees. Out of this, 1 million rupees is due as debt repayment, while 3 million rupees remain with him.
He wants clarification on the following:
◈ What is the correct method of paying zakāt in this situation?
◈ If the money is received back in installments during the year, will zakāt be due on those installments?
◈ Should the debt amount be deducted before calculating zakāt?
◈ Is zakāt due on the debt amount as well?
❖ Answer
Al-ḥamdu lillāh, waṣ-ṣalātu was-salāmu ʿalā Rasūlillāh, ammā baʿd!
◈ Zakāt on Current and Receivable Amounts
✔ Zakāt is obligatory on the money you currently possess.
✔ Money receivable from others — whether:
- given as a loan, or
- the price of goods sold but not yet received,
also falls under zakātable wealth.
Additionally, any gold or silver in your possession is also subject to zakāt.
◈ Zakāt and Debts
◈ Money you have borrowed from others (i.e., liabilities on you) is not zakātable — zakāt is the responsibility of the lender.
◈ If you have given a loan to someone, zakāt remains your responsibility, not the borrower’s.
◈ Installment-Based Sales (Qistī Transactions)
Some businessmen practice sales where:
- the cash price is lower, and
- the credit/instalment price is higher.
This practice is not permissible, as the Prophet ﷺ said:
«مَنْ بَاعَ بَيْعَتَيْنِ فِیْ بَيْعَةٍ فَلَهُ أَوْکَسُهُمَا أَوِ الرِّبَا»
(Abū Dāwūd, Kitāb al-Buyūʿ, Bāb fī Man Bāʿa Bayʿatayn fī Bayʿah)
Meaning:
“Whoever makes two deals in one sale, he is entitled only to the lesser of the two, or else it is ribā (interest).”
In installment sales, usually, the price is set higher compared to cash, which falls under ribā as clarified by this ḥadīth.
◈ Conclusion
✔ Zakāt must be paid on:
- your available cash,
- receivables (whether loaned or due as sale price),
- and gold/silver in your possession.
✔ Zakāt is not due on money borrowed from others, since it is not your ownership.
✔ If you have given money as a loan or are to receive installments for goods sold, that amount is zakātable.
Hādhā mā ʿindī, wallāhu aʿlam biṣ-ṣawāb.
