Question

Is Zaka’h a form of income tax or are the two different? Is a person, who owes a loan exempted from paying Zaka’h or not? Also, is the mortgage on a house or any other loan considered as debt, even though such a debtor is doing reasonably well financially?

Wassalaam

Answer

Zaka’h (at varying rates) is applicable to:

1. Total wealth of a person, over and above a certain limit;

2. Total production of a person, over and above a certain limit;

3. Herds of a person; over and above a certain number

This should adequately clarify that Zaka’h – even though it is a tax, imposed, collected and distributed by the Muslim state – is not the same as income tax.

Zaka’h is not payable on any borrowed or loaned amount. This implies that if a person owes any amount to another person, he shall not include the borrowed amount in his total wealth, upon which Zaka’h will be assessed at the rate specified for wealth in the Shari`ah. The remaining wealth of a person (excluding the borrowed amount) shall be assessed for Zaka’h, in the same manner, as would have been the case if the person had not owed any loans. The case of mortgage-based or collateral-based secured loans would be the same as described above for ordinary loans.

September 21, 2000

UIUK team