Do I pay Zakah on money I loaned out?

If you loan money to another person but the debt is not due yet, you will not pay Zakāh on that money, but the debtor will. For example, if Ali loaned $10,000 to Zayd to be paid in one year, Zayd will pay Zakāh on that money since he has no intention to pay back the loan before the due date.

If you loan money without a due date or the debt is due now, you will pay Zakāh on it. For example, Ali sells a computer to Zayd for $1,000 but gives him a thirty day grace period to pay him. Since the debt is technically due now, Ali will pay Zakāh on this money which he expects to receive soon. If Zayd is unable to pay back his debt then Ali will not have to pay Zakāh on this money since it is not likely to be recovered.

“If a woman has not received her dowry or one has not yet received his salary or inheritance has not as yet been distributed, then Zakat will not be obligatory. Its calculation will commence from the day of receiving, meaning there will be no Zakat for the previous years.” (See: Bada’i al-Sana’i, vol. 2, p. 90-91)

“(From the conditions for the obligation of Zakat is having complete control over the wealth), and that is to have ownership and possession. If one has ownership of the wealth and not possession…or possession and not ownership…, then zakat will not be obligatory…As far as the commodity that has not yet been delivered is concerned….it will be part of the Nisab hence zakat will be obligatory on it according to the correct opinion.” (al-Fatawa al-Hindiyya, 1/172)

[Shaykh] Mustafa Umar

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