WHEN IS ZAKAAT FARZ ON A CREDITOR
A person is obliged to give Zakaat on money or valuable owned by him, whether it be a loan or a business debt. This applies only if the debtor acknowledges that he owes the amount or promises to pay it; or if on the contrary he refuses the claim, and there are witnesses or documentary proof to support such claim by which it could be recovered through a judiciary. Loans are basically of three types:
- QAWI (Secure loan):
a. If cash, gold or silver has been given as a loan or when merchandise has been sold on terms and the payment is received after a year or two; and the value of the amount owing is that of Nisaab, then this is called a Qawi loan, and therefore, Zakaat for those years prior to payment will be Farz.
b. In the case where this loan is repaid in installments, if the repayment received equals to one fifth (20%) of the Nisaab, Zakaat of this one fifth becomes Farz. If several years have passed, then Zakaat must be given for all the past years. Zakaat of the past years has to be calculated annually in units, each unit being twenty percent of he Nisaab. Government bonds are of this category and Zakaat has to be paid on recovery of this loan as described above.
c. If any such loan is not equal to Nisaab then Zakaat will not be Farz; but if this loan together with other excess wealth which is in one’s possession when combined becomes equal to Nisaab then Zakaat will be Farz on the combined total of both amounts. - MUTAWASSIT (Insufficiently secure loan):
a. If a loan is not cash, gold, silver or merchandise (as mentioned in 1. (a) above) but is personal effects (old clothes, house-hold items etc. )which are sold or is a property which was sold and the value of it is that of Nisaab, then it is called a Mutawssit loan. Thus, Zakaat for those years prior to payment will not be Farz.
b. If this loan is equal to or in excess of Nisaab and is fully recovered after several years, then Zakaat on that amount is not Farz for all the past years. However, if anyone in such an instance gave Zakaat, then such an act is rewarded by Allah Ta’ala.
c. In a case where the repayment is made in installments, then Zakaat will only be Farz if the repayment is equal to Nisaab and is retained for a full Islamic year.
d. If the installment received is less than Nisaab, but one is in possession of other wealth on which Zakaat is due( i.e. Nisaab on which a year has elapsed), then this installment must be added to the wealth, and Zakaat must be given on the total. It is not necessary for a year to pass over this installment that is received. - DHA’EEF (Insecure loan): a. If money owing to one, is not in lieu of cash, gold, silver, merchandise or personal effects or property which is sold; but is due to outstanding inheritance, bequests, Meh’r (dowry) salary etc., then it is called Dha’eef loan.
b. Zakaat will become Farz when these monies are received and they are equal to or in excess of Nisaab and further they are retained for a full Islamic year. There is no Zakaat for the years that have passed before receiving these amounts.
c. There is no Zakaat on Provident and Pension funds. Zakaat must only be paid on these amount after they are recieved from such funds provided the amount is equal to or in excess of the Nisaab and is retained tor a full Islamic year.
NOTE: Some Ulama have categorized these funds as Qawi or Mutawassit loans, and thus Zakaat becomes obligatory on the contributions for the past year as well. It is therefore advisable that as a precautionary measure Zakaat should be paid for the past years on these as well.