Tuesday, August 16, 2022 - 18 Muharram 1444

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I receive quarterly dividends from a bank deposit which is considered my main source of income. Should I pay zakat on the original deposit or on the dividends only?

I receive quarterly dividends from a bank deposit which is considered my main source of income. Should I pay zakat on the original deposit or on the dividends only?

Answer

The principal is that the value of zakat equals one quarter of a tenth, 2.5% of the original deposit, when the wealth reaches nisab [minimum sum on which zakat is due] and after the sum has been in the owner’s possession for one lunar year.

Some contemporary scholars believe that zakat on money is owed on only the interest of bank deposits which its owner uses for his livelihood. This is an ijtihad [independent scholarly reasoning] based on the fact that the money deposited in a bank is the same as the proceeds generated by a piece of land, since both are a source of income and a decrease in either could harm the owner’s interests.

Based on this, it is permissible for the depositor to pay one tenth of the dividends (without taking into account the passage of one lunar year). This suffices for the zakat on the money according to some of scholars.
And God the Almighty knows best.