Zakat on Properties
1) If a person owns a property that they live in with family and it is mortgage free, are they liable to pay Zakat on the property?
2) If the same person owns other properties as investment, but has a mortgage for those properties, will the mortgage be deducted? The debt is due to investment rather than necessity.
3) For investment properties that still have a mortgage, will Zakat need to be paid on the rental income? If the rental income is used to pay the mortgage, will Zakat be due on the original rental income or what is left from the rental income?
بسم الله الرحمن الرحیم
1) The following are Zakatable assets: (1) Gold (2) Silver (3) Animals (4) Business goods (5) Cash/Money. Therefore, properties in themselves are not Zakatable assets unless they were purchased with the intention of business (selling them). Therefore, there is no Zakat on the property bought for residence.
2) The mortgage amount that is due within the next 12 months will be deducted (as outlined in an earlier answer). It should be noted that if the investment properties were purchased for rental income, there is no Zakat on the properties as mentioned above. However, Zakat will be due on the rental income as this is part of Cash/Money.
3) A person is required to calculate on his Zakat anniversary all his Zakatable assets including money and subtract any debts. All the money he possesses on the Zakat anniversary will be included in the calculation including any money remaining from the rental income. Any money from the rental income or otherwise that has been spent before the Zakat anniversary on mortgage repayments or otherwise will not be included in the calculation. Similarly, the mortgage payments due within the next 12 months will be deducted, as mentioned above.
Allah knows best
2 Dhū al-Qaʿdah 1441 / 24 June 2020
Approved by: Mufti Shabbir Ahmed and Mufti Muhammad Tahir