Calculation of Zaka'h For a Sleeping Partner

I would like to ask a question which would be better explained with an example: suppose I invest Rs. 1 lakh in any business as a sleeping partner.

2. Whether the zakat will be on total investment or profit received only.

Reply

All assets which are in one’s personal and business use are exempt from Zakah. Thus there is no Zakah on the principal amount invested (being an asset used for business purposes). Calculation of Zakah on businesses could vary from business to business depending upon the nature of the business (that is, whether a business is basically a trading concern or a production unit). A trading concern may follow the guidelines given below:

1. Fix a particular day in a year on which Zakah shall be calculated;

2. Add all inventories (stocks in trade) and cash available on that given date;

3. 2.5 percent of the amount arrived at in number 2 shall be the Zakah payable.

If the business is paying its Zakah, no Zakah shall be levied on its owners or shareholders (whether sleeping or active). But in case the company is not paying its Zakah, a particular owner should then pay his share of Zakah. The following guidelines may be used for the calculation of Zakah:

1- In case of a Production Business (Using both Labor and Capital to Avcheive Production)

Suppose a person's investment is two percent of the total investment in the business.
Suppose the total cost of goods produced by the company is Rs. one million.
This means that the total Zakah levied on the company comes to (5% of 1,000,000) Rs. 50,000.
The share of Zakah of the particular individual holding two percent of the investment comes to (2% of 50,000) Rs. 1,000.

2- In case of a Production Business (Using either only Labor or only Capital to Acheive Production)

Suppose a person's investment is two percent of the total investment in the business.
Suppose the total cost of goods produced by the company is Rs. one million.
This means that the total Zakah levied on the company comes to (10% of 1,000,000) Rs. 100,000.
The share of Zakah of the particular individual holding two percent of the investment comes to (2% of 100,000) Rs. 2,000.

3- In case of Trading Company

Suppose a person holds two percent of the total investment in the business.
Suppose the total value of the closing inventory on the Zakah deduction date is Rs. one million.
This means that the total Zakah levied on the company comes to (2.5% of 1,000,000) Rs. 25,000.
The share of Zakah of the particular individual holding two percent of the investment comes to (2% of 25,000) Rs. 625.

Now, if you do agree with our point of view that the state does not have any right to impose any other taxes on its Muslim citizens, besides Zakah, you may adjust your Zakah payable against the taxes paid by the company. But in case, you do not agree with this premise, then you shall have to calculate Zakah on the lines described above and pay the Zakah amount besides the amount paid in taxes.