Zakat calculation on re-invested stocks

Aug 15, 2021 | Zakat (Charity)


As Salamu ‘Alaykum

I would like to explain my question with the following example,
Lets assume, I invested in ABC company stocks worth $100. After couple months, I sold all ABC stocks (this was a short term investment). I recieved $300 for my $100 investment, $200 is profit.
Now, I re-use all the money i.e., $300 to buy stocks of XYZ company. This is a long term investment.

The question is, how do calculate my zakat for the above scenario given?
Will I need to consider both short and long term scenarios while calculating my zakat i.e.,
short term = initial investment $100 on ABC stocks-> $300 * 2.5% = $7.5
long term = initial investment $300 on XYZ stocks-> based on current market value, lets say the equity is $500 -> ($500 * 40%) * 2.5% -> $500 * 1% = $5
So in this method of calculation, $7.5 + $5 = $12.5 will be my total zakat for the above example?

or, will I need to consider just the long term scenario as the money from the short term transaction is now invested in long term stocks?

I am sorry for the weird scenario question. I hope you find the explanation easy.

JazakAllah Khairan


If by your zakat date you had sold your previous stocks (ABC) and purchased stocks (XYZ) for long term investment then you will only take the current stocks (XYZ) into consideration. When calculating zakat one only looks at the wealth they have on the zakat date.

Hence your calculation of ($500 * 40%) * 2.5% -> $500 * 1% = $5 will be correct.

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel