Is zakat payable on rental income as well as on the share of property that is owned?
February 8, 2017
Q: 1 Can you please confirm that zakat is payable on rental income as well as the share of property that is owned. For example, if the annual rental income is £15,000 and the annual mortgage payment is £12,000, is zakat due on the difference (£3000 in this example) if the person hasn’t spent any money from rental income?
2. The rental property is worth £400k and the person paid £100k deposit to buy the rental property; so the person owns 25% of the property.I am referring to a typical high street mortgage where a person owns 25% of the property and the remainder is a bank loan. When zakat is due, the property is worth £500k, 25% of which is £125k. Is zakat also due on the share of the property and if so, is it due on £100k or £125k? Is zakat only due on the share of property if the person had the intention to sell in the future? If he doesn’t intend to ever sell it and has bought it for his children, is zakat due on the share?
الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب
A: : 1) In the scenario given, and assuming that you do not have any other zakatable assets or any other liabilities, your net zakatable amount will be £15,000 less the amount that represents repayment of the principle part of the original loan within the £12,000. i.e., not including any interest. For more information regarding zakat on interest based loans please see the link below: http://alqalam.org.uk/research-papers/zakat-on-islamic-home-purchase-plans/
2) If the property was purchased for the rental market there is no zakat payable on the value of the property. However, any rental income that remains on the zakat anniversary will be included in your zakat calculation. If a property is purchased with a clear intention of resale, then the full value of ownership share is subject to zakat. In the situation described in the question, your ownership share is 100% [unless you have a different arrangement]. Thus, the full value of the property [£500K] should be included in the zakat calculation. If the property was not purchased with a clear intention of resale or the intention has now changed for either rental or for personal use, the property is not liable for zakat.