Q: Can you give a step-by-step guide on how to calculate Zakat on shares?

A: STEP 1: Get hold of the balance sheet

If shares are bought as an investment to attain dividends, the shareholder needs to view the balance sheet of the company. This can be acquired by searching online by simply typing in the company name followed by balance sheet e.g. “XYZ Balance Sheet”.

STEP 2: Identify Zakatable assets on Balance Sheet and add up their values

The following are typical Zakatable assets on a balance sheet:
• Trade and other receivables
• Inventories
• Derivative financial instruments
• Investments
• Cash and cash equivalents

The following are typical non-Zakatable assets:
• Intangible assets
• Property, plant and equipment

Add up the value of all Zakatable assets on the balance sheet.

STEP 3: Subtract deductible liabilities from the Balance Sheet

The following are typical deductible liabilities on a Balance Sheet:
• Current loans and other borrowings
• Trade and other payables
• Current tax liabilities

STEP 4: Find out the market cap (the worth) of the company

Find the market cap of the company you have shares in by simply making a search online of ‘Market Cap XYZ’. This should show up on the search:

STEP 5: Calculate the percentage of Zakatable assets in the company

Divide the net Zakatable assets by the market value of the company and multiply by 100. This will give you a percentage.

STEP 6: Calculate the equivalent amount in pounds of the percentage acquired from step 5

Apply the percentage calculated from step 5 to your shares. You will get a value in pounds.

Step 7: Pay Zakat on shares by paying 2.5% of the value from step 6 or add it to the rest of your calculation

Pay 2.5% Zakat of the Zakatable assets amount in pounds.

And Allah knows best!

Mufti Faraz Adam