HOW TO CALCULATE ZAKAT ON SHARES
A share is a divided-up unit of the value of a company. If a company is worth $100 million and there are 50 million shares in issue, then each share is worth $2. A company’s shareholder is a partner in ownership of the company in accordance with the amount of shares he owns in the company.
Unlike Zakat on Savings which takes the lowest value of savings during the Haul period that has reached the Nisab, Zakat on Shares is based on the market value of the shares at end of the Haul or financial year period because shares fluctuate in value more rapidly. There are two ways to calculate Zakat on Shares:
- One Type of Shares: If the shareholder only owns one type of shares, Zakat on Shares is calculated by taking 2.5% of the market value of the shares when Haul and Nisab are reached
- Multiple Types of Shares: If the shareholder owns more than one type of shares, the calculation and payment of the Zakat on Shares is done at the end of the Financial Year (ie. 31 Dec) by taking 2.5% of the market values of all the shares at the end of the year.
EXAMPLE WITH ONE TYPE OF SHARES
Date of purchase of shares X: 11/05/09
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Today's date: 02/05/10
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Today's Nisab: $4606
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Number of Shares Owned
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Value Per Unit Share on2 02/05/10
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X Company: 4000 units
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$1.30
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Valuation of shares at X Company on date Haul is reached:
= $1.30 x 4000
= $5,200 (above Nisab value)
My Zakat on Shares for Haul period 11/05/09 – 02/05/10 is:
= $5,200 x 2.5%
= $130.00
EXAMPLE WITH MULTIPLE TYPES OF SHARES
Today's date: 31/12/09
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Nisab on 31/12/09: $4612
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Number of Shares Owned
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Value Per Unit Share on 31/12/09
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X Company: 3000 units
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$1.30
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Y Company: 1000 units
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$12.35
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Valuation of shares at X company at end of financial year:
= $1.30 x 3000
= $3,900
Valuation of shares at Y company at end of financial year:
= $12.35 x 1000
= $12,350
Total valuation of shares at end of financial year:
= $3,900 + $12,350
= $16,250 (Above Nisab value)
My Zakat on Shares on 31/12/09 is:
= $16,250 x 2.5%
= $406.25
Click here to download the Zakat on Shares brochure.