When it comes to Calculation on Shares and investments there are three main scenarios to consider. 

Scenario 1: Day trading/short-term trading (Less than one lunar year)

 Include the entire value of your portfolio and pay Zakat on it.

Scenario 2: Long term investments (one lunar year or more) 

From the balance sheet of the company (in which you hold shares), use the following formula:

1. Amount Y =      Cash + Cash Equivalent + Accounts Receivables + Inventory
                                      Total Number of Shares Issued By Your Company
2. Your Zakatable Amount = [(Amount Y) x (Number of shares you own)]

Please note, if you are receiving dividends, please add them to your Zakatable assets. • 

Scenario 3: Cashing out Upon cashing out, the amount remaining after taxes and fees are added to your Zakatable assets.

Zakat is paid to deserving individuals who fall into one or more of the following eight categories:

• The poor
• The needy
• Those employed to administer Zakat
• Those whose hearts are to be reconciled
• Those in slavery
• Those in debt
• In the way of Allah
• The destitute traveller

This is determined by the following verse in the Quran:

Indeed, [prescribed] charitable offerings are only [to be given] to the poor and the indigent, and to those who work on [administering] it, and to those whose hearts are to be reconciled, and to [free] those in bondage, and to the debt-ridden, and for the cause of God, and to the wayfarer. [This is] an obligation from God. And God is all-knowing, all-wise. – Al-Tawbah, 9:60

What do I pay Zakat on?

The items upon which Zakat is due include:

• Cash and Liquid Assets
• Gold and Silver
• Debts owed to you — the amount of money lent to others that will be repaid confidently
• Shares and Investments
• Property and other fixed assets
• Pension Funds/RRSP/RESP/TFSA and others
• Business Assets

Please note, you are required to pay Zakat on these items, if you meet the following criteria:

Social

• You must have complete ownership of wealth
• Free of haram income — Zakat is not due upon earnings that are from haram sources. Rather, that wealth should be disposed of by giving it in charity, and seeking forgiveness from Allah after. 
• Meets Nisab - The minimum threshold of wealth a person must own at which Zakat becomes payable. 
• One lunar year passes over the wealth after attaining the Nisab amount

Your Zakat year begins on the date your wealth first equaled or exceeded the Nisab. Zakat should then be calculated and paid after one lunar year passes and every year thereafter on the same date.

For RESP funds there is a difference of opinion since there are children involved in the equation. One school of thought makes adulthood a requirement for the liability of Zakat. However, the majority of schools of thought consider the wealth to be liable, therefore, the guardians of the Zakatable wealth should pay Zakat on the child’s behalf. 

National Zakat Foundation follows the opinion of which Zakat is payable on RESP accounts.

Please consult with your imam/scholar you follow. 

To calculate Zakat due on RESP funds you would take the total value of the RESP and deduct any penalties that would be incurred as a result of early withdrawal (on your Zakat payment date) prior to the maturity of the funds. 

Zakat on RESP = Total RESP Value minus Early Withdrawal deductions

Note: One can do an early withdrawal and withdraw their own contributions without penalty.

For example, if you have a child with an RESP fund containing $12,000 of which you contributed $10,000 and the government contributed $2,000, then you deduct the government contribution from the total (as this would be the penalty for early withdrawal prior to maturity). As a result, you would be liable to pay Zakat on the $10,000.

Zakat is only mandatory once your assets amount to above the Nisab requirement. If your assets amount to below the Nisab requirement, any amount you do pay would be considered as Sadaqah, and you will still be rewarded for it. And Allah knows best.

1. Understanding the Concept of Giving Zakat in Advance

Zakat, one of the five pillars of Islam, is an annual obligation to give a portion of your wealth to those in need. Traditionally, this obligation is met once a year on a specific "Zakat day," determined by the lunar calendar. However, there are situations when individuals may want or need to pay Zakat in advance of their Zakat day. Understanding how to calculate and deduct these advanced payments is crucial to ensure you're fulfilling your Zakat obligation correctly.

2. Is Giving Zakat in Advance Permissible in Islam?

Yes, giving Zakat in advance is permissible in Islam. It is the view of the majority of scholars that there's nothing wrong with paying your Zakat ahead of your Zakat day as long as the annual Zakat is paid in full by that day. The flexibility to give Zakat in advance provides believers with more options to meet their Zakat obligations, especially if they face financial uncertainty or unpredictability.

This payment in advance is more justified when there is an urgent need for assistance or there is a greater benefit for the Zakat recipients.

In a well known story, Ali ibn Abi Taleb (رضي الله عنه) narrated that “al-Abbas (رضي الله عنه) asked the Messenger of Allah (ﷺ) to allow him to give his Zakat before its due date and the Messenger of Allah (ﷺ) gave him the permission to do so” (Tirmithi and Abu Dawood)

It was said that Al-Abbas (رضي الله عنه) paid his advanced Zakat for the period of two years.

The proof for that is what was narrated by Abu ‘Ubayd al-Qaasim in al-Amwaal (1885) from ‘Ali, that the Prophet (ﷺ) asked al-‘Abbas to give the Zakat of two years in advance.

3. Calculating Advanced Zakat Payments: Considerations and Guidelines

Advanced Zakat payments can be calculated in various ways, depending on your financial circumstances. For some, it might be more convenient to pay Zakat on a monthly basis in advance. This method allows for smaller, manageable payments spread throughout the year, instead of a lump sum once a year. However, when making these calculations, you should ensure the total amount paid by your Zakat day meets the 2.5% of your wealth required for Zakat.

Additionally, Zakat payers need to have the nisab before they can pay the Zakat in advance. This requirement was mentioned as a condition for the validity of this concession by many Muslim scholars and some of them even claimed that this was subject to scholarly consensus.

Others have placed another consideration or restriction, which is that Zakat cannot be paid in advance for a period of more than two years. Most likely, they took these guidelines from the story of Al-Abbas (رضي الله عنه).It seems that this is a safe precaution and Allah knows better.

4. How to Deduct Advanced Zakat Payments from Future Calculations

When you give Zakat in advance, these payments should be deducted from your future Zakat calculations. For example, if you choose to pay a monthly amount in advance, you would add up these payments and subtract the total from your Zakat calculation at the end of the lunar year. This ensures that you are not paying more than what is required.

5. Balancing the Responsibility of Giving in Advance with Adhering to Zakat Rules

Advanced payments should not replace the annual Zakat obligation and should still follow the same principles – namely, that Zakat is due on wealth that has been in your possession for a lunar year. Remember that giving Zakat in advance should be a means to better manage your Zakat obligation, not a way to bypass it.

6. Consulting Scholars for Clarification on Giving Zakat in Advance

If you're unsure about giving Zakat in advance, consulting with Islamic scholars or a knowledgeable Imam can provide clarity. They can guide you on how to calculate and deduct advanced payments accurately, ensuring you are adhering to Islamic principles while fulfilling your Zakat obligations.

In conclusion, while giving Zakat in advance is permissible and may offer more financial flexibility, it's crucial to understand how to calculate and deduct these payments accurately. This will ensure that you fulfill your Zakat obligation in accordance with Islamic teachings, offering support to those in need while meeting your financial responsibilities.

1. Focusing on Local Zakat Distribution: A Fulfillment of Islamic Principles

The giving of Zakat, one of the five pillars of Islam, has long been a means of supporting those in need. While Zakat can be given to anyone in need, regardless of geographical location, there is a strong emphasis within Islamic teachings on the distribution of Zakat at a local level.

It is by the consensus of all four schools of thought that it should be given locally. This is determined by the following Hadith: Abdullah Ibn’ Abbas (May Allah be pleased with him) narrates: “The Prophet sent Mu’adh to Yemen and said, ‘Invite the people to testify that none has the right to be worshiped but Allah and I am Allah’s Messenger, and if they obey you to do so, then teach them that Allah has enjoined on them five prayers in every day and night (in twenty-four hours), and if they obey you to do so, then teach them that Allah has made it obligatory for them to pay the Zakat from their property and it is to be taken from the wealthy among them and given to the poor.” (Sahih Al-Bukhari)

The last part of this Hadith is a strong proof which indicates that it is always a priority to accommodate the needs of the local community before Zakat payers consider other options.

2. The Significance of Community-Based Zakat Efforts

The concept of community in Islam is a significant one. When we pay Zakat locally, we're not just fulfilling a religious obligation; we're also contributing to the betterment of our immediate environment. Community-based Zakat efforts ensure that the wealth is redistributed within the community, providing an essential lifeline to the underprivileged and vulnerable in society.

3. Addressing the Increasing Needs and Challenges of Local Communities

In today's world, the challenges faced by local communities are vast and often increasing. From poverty and homelessness to lack of access to quality education and healthcare, the needs are significant. Local Zakat contributions play a vital role in helping to alleviate these struggles, fulfilling the rights of the less fortunate in our immediate surroundings.

As Muslims living in Canada, it is important to balance our giving between local and international, but we have to remember that our collective accountability for the poor and destitute within Canada is paramount and must not be forgotten. As the number of eligible Zakat recipients increases in Canada day by day, they have a right over Canadian Zakat payers.

Some may feel their Zakat has a more significant impact if sent abroad. While it's essential to assist those in dire need worldwide, we must remember our accountability for the poor and destitute within our local communities. Again, they too have a right over our Zakat.

4. Building Stronger Bonds and Ties through Local Zakat Contributions

By prioritizing local Zakat, we can strengthen communal ties, promote empathy, and foster a sense of shared responsibility for the welfare of our community. It serves as a tool for social cohesion, solidarity, and mutual support among community members, enhancing social and economic stability.

5. Supporting Local Charitable Organizations and Initiatives

There are numerous charitable organizations and initiatives that work tirelessly to improve the conditions of those in need within our communities. When we pay our

Zakat locally, we support these organizations in their efforts, enabling them to continue their important work.

While the importance of local Zakat is supposed to be clear, many Muslims believe that local government programs are supposed to fulfill the needs of both individuals and families as well. Therefore, there is no need to give Zakat locally and poor people within our communities are supposed to manage their basic needs with what is available to them from these government programs. However, local charitable organizations are well aware of the suffering and the pain many people go through within our communities due to lack of resources and increasing cost of living as well. While it's essential to assist those in dire need worldwide, we must remember our accountability for the poor and destitute within our local communities. They too have a right over our Zakat.

7. Inspiring Others: Stories of Impact from Local Zakat Contributions

Around the world, there are inspiring stories of how local Zakat contributions have changed lives. These tales of change and progress are a powerful reminder of the transformative power of Zakat when given locally. Whether it's helping someone escape the cycle of poverty, funding local educational initiatives, or providing urgent medical care, the impact of local Zakat is deeply felt and far-reaching.

At NZF, we take the responsibility of managing your Zakat very seriously; every dollar of Zakat collected is utilized in Canada. Since 2013, our mission has been to make the pillar of Zakat impactful across the country.

In conclusion, local Zakat is a vital aspect of our Islamic obligations and has a profound effect on our communities. It's a way of fulfilling the rights of those less fortunate in our immediate vicinity, addressing local needs, and fostering a sense of shared responsibility and community. By focusing on local Zakat distribution, we can strengthen our communities and work towards a more equitable society.

1. Understanding the Treatment of Debts in Zakat Calculation

When calculating Zakat, an important consideration that often arises is how to handle owed money or debts. Debts can impact your Zakat obligation, as they may potentially decrease your overall Zakatable wealth. This article aims to provide a clear understanding of the treatment of debts in Zakat calculations, with a focus on what kind of debts can be deducted, their impact on Nisab (the minimum amount of wealth a Muslim must have before they are liable to pay Zakat), and how to accurately calculate your Zakat when you have debts.

2. Types of Debts: Is All Debt Considered Deductible?

Not all debts are considered equal in terms of Zakat calculations. Debts can be broadly categorized into two types: short-term debts and long-term debts.

Short-term debts are obligations that must be paid within a year. This includes your regular expenses like utility bills, rent, groceries, and the like, and debts owed to other people that you intend to repay within the year.

(It’s important to note that future expenses do not qualify as a debt. For example, you cannot include next month’s rent and utilities in your deductibles. You can, however, deduct the expenses you will incur during the current month (rent, groceries, utilities, bills, etc).

Long-term debts, on the other hand, are obligations that span over a year. These can include mortgages or long-term loans.

When calculating Zakat, short-term debts are typically deductible from your Zakatable assets. As for long-term debts, there is a difference of opinion among scholars. Some suggest that long-term debts should be deducted entirely, while others propose deducting only the amount due within the coming lunar year.

3. Deducting Debts in Zakat Calculation: Short-Term and Long-Term Liabilities

When calculating your Zakat, you would first total all your Zakatable assets. These could include cash, jewelry, shares, rental income, business commodities, and other such assets.

Once you have this total, you would then subtract your short-term liabilities - those due to be paid within the coming lunar year. As mentioned, the treatment of long-term liabilities can vary, so it's advisable to consult with a scholar or expert on how to handle these.

Zakatable assets - liabilities = Total Zakatable assets and then take 2.5% of this.

It is important to understand that your zakatable assets are your savings after one year has passed. So it means that you have already spent your living expenses for that year. So they would not be deducted again as that would be double deduction.

Some scholars allow deduction for upcoming bills and debts in the month you are paying zakat. So you would deduct rent, electricity and other bills but not food expenses.

Does Having a Student Loan Affect Zakat?

Absolutely. The amount you intend to repay within the coming year can be deducted from your Zakatable assets.

Example:

• You have $24k in cash.
• You intend to repay $20k in student loans in the upcoming year.
• Zakatable assets: $24k - $20k = $4k.
• Zakat due = 2.5% of $4k = $100, assuming you use the silver Nisab.

4. Impact of Owed Money on Nisab Requirement and Zakatable Assets

Debts can significantly impact your Nisab requirement and Zakatable assets. If, after deducting your debts, your remaining assets fall below the Nisab threshold, you would not be required to pay Zakat for that year. The Nisab is typically the equivalent value of 85 grams of gold or 595 grams of silver.

Remember, the Nisab is assessed based on the lunar year, not the calendar year. So, it's important to consider the timing of your debts and assets.

5. Examples and Case Studies: Calculating Zakat with Various Debt Scenarios

Let's consider a few examples to clarify how debts factor into Zakat calculation.

Scenario 1:

You have Zakatable assets worth $5000, and you owe $1000 that will be repaid within the coming lunar year. The Nisab is $4000. You would subtract your debt from your total assets ($5000 - $1000 = $4000), and since this meets the Nisab, you would owe Zakat. Your Zakat would be 2.5% of $4000, which equals $100.

Scenario 2:

You have Zakatable assets worth $5000, and you owe $2000 that will be repaid within the coming lunar year. The Nisab is $4000. After subtracting your debt, you would have $3000 left ($5000 - $2000 = $3000). As this is below the Nisab, you would not owe Zakat for that year.

Scenario 3:

You have Zakatable assets worth $10,000, and you have a long-term debt of $20,000. If you follow the opinion that only the portion of long-term debt due within the year is deductible, and let's say $2000 is due, then your Zakatable assets would be $8000 ($10,000 - $2000 = $8000). Hence, you would owe Zakat.

6. Consulting Scholars and Experts for Guidance on Zakat Deduction for Debts

Given the complexities around debts and Zakat, it's often advisable to consult with Islamic scholars or experts who specialize in Islamic finance. They can provide guidance tailored to your specific situation and help ensure you're calculating and paying your Zakat accurately. Remember, the goal of Zakat is not to create hardship but to facilitate a fair distribution of wealth and support those in need.

By understanding the impact of debts on your Zakat calculation, you can accurately fulfill this important pillar of Islam, contributing to social justice and compassion in your community.

1. The Ruling on Zakat on Interest Income: Different Opinions

The issue of Zakat on interest income is one that has been the subject of much debate among scholars and experts of Islamic finance. There is a consensus that earning interest (Riba) is prohibited in Islam, as it promotes inequality and exploitation. However, the handling of such income, when accrued involuntarily, differs based on varying interpretations of Islamic law.

2. Is Interest Income Considered Zakatable?

Given that interest income is inherently haram (forbidden) in Islam, it is not considered as part of your wealth for the purpose of calculating Zakat. However, it's not encouraged to hold onto such income, and it is recommended to get rid of it as soon as possible in a manner that doesn't reward the holder.

Tainted wealth must be gotten rid of by the owner by donating it to any cause without expecting reward for it in return. Once it leaves your possession, it can be used for any good cause like donating to an Islamic school, digging water wells, etc because the recipient of that wealth is not affected by the origin of that money. Some scholars who hold a strict opinion say it is disliked to donate it to Masjids but did not say it is haram. Again, you as the giver will expect no reward from Allah for it. 

The principle is that when money is donated, the ruling changes when ownership of the money changes. Therefore, NZF follows the scholarly opinion that tainted wealth is allowed to be used for a number of our impactful projects like feeding the hungry, winter clothing drive, alleviating financial hardship of needy families, providing nutritious food to halal food banks, operational and administrative costs of running the organization, and many more. You may donate that wealth to building a Masjid and you are not obligated to tell the masjid management whether it is tainted or not. That is entirely your choice. It will not change the outcome of your donation. And Allah Knows Best.  

3. Exploring the Use of Zakat on Interest Income to Pay Off Debts

There are different viewpoints regarding the use of interest income. Some scholars suggest that if you were forced into a situation where your account accrues interest, or if you needed to use a line of credit due to a pressing need, you could potentially use the interest earned to pay off the interest charges on your line of credit.

This ruling, however, is highly specific and should not be shared as a general fatwa. As such, individual circumstances should be discussed with a local Imam or scholar.

On the other hand, if you were not in a situation that justified the accumulation of interest income, you should dispose of the interest income and refrain from using these facilities.

4. Guidelines for Donating Zakat on Interest Income

Interest income should ideally be disposed of by giving it to charity. It's important to remember, though, that since interest is haram, this is not considered Sadaqah (voluntary charity) or Zakat, but a way to cleanse your wealth.

It's crucial not to use this money for personal gain or consumption. Instead, you should donate it to causes that serve the community at large. This could include helping the poor, aiding in disaster relief efforts, contributing to educational initiatives, and so on.

5. Seeking Scholarly Opinions on Zakat Calculation for Interest Income

Because the issues surrounding interest income and Zakat are complex and multifaceted, it's advisable to seek guidance from scholars or experts in Islamic finance. These individuals can provide informed perspectives based on a deep understanding of both the financial aspects and the religious principles involved.

Remember, while Zakat is a crucial pillar of Islam, it should not create undue hardship. Instead, its purpose is to encourage economic balance and help those less fortunate. Consult with experts, consider your personal circumstances, and aim to make decisions that align with these principles.