Zakaat on loaned amounts

Question:-

My question is related to Zakaat. I have loaned money to people which is due to me. They are repaying me, but it will be paid to me over a 3 year period. When I calculate my Zakaat, do I have to include the outstanding balances as part of my Zakaat-able assets, or do I only include the amounts once received?

Answer:-

We understand from your query that the debtors are regularly paying towards their outstanding debts with you. It is, therefore, better for you to pay Zakaat on the outstanding amounts that are due to you, on a yearly basis, when calculating your annual Zakaat. For example, your Zakaat date is the 1st of Ramadaan of every year. On the 1st of Shawwal 1442 you loaned R12 000.00 to Amr. He pays R1000.00 a month (on the 1st day of every Islamic month) towards his loan. By the time you reach your yearly Zakaat date, which is the 1st of Ramadaan 1443, he would have already paid R11 000.00. An amount of R1000.00 would remain outstanding from the loan afforded to him. In this instance, that R1000.00 would be included in your yearly Zakaat calculation (together with all your other Zakaatable assets).

The second option is, to pay Zakaat when you receive the outstanding debt in full. For example, Zaid owes you R1000.00 but he pays the R1000.00 debt after a period of three years. In this instance, you may pay the Zakaat for the past years upon receiving the R1000.00. For the first year, the Zakaat will be R25.00 on the full R1000.00. For the second year, you will pay Zakaat on R975.00 which is 24.38, and for the third year, you will pay Zakaat on R950.62, which is R23.76. In this manner, the Zakaat will be settled.

ALLAH TA’ALA KNOWS BEST!

ANSWERED BY:

Mufti Mohammed Desai

Date: 06 Rajab 1443 / 09 March 2022