Title

How does one pay zakat oncredits extended to the purchaser at sale ("debts receivables" or "accounts receivables")?

Question

If you extend credit when you sell merchandise, is your whole debtors book zakatable? Obviously theres a chance of default from certain debtors. Whats the shariah rulling on this?

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Zakat becomes compulsory(fardh) according to one’s financial condition. If one has the nisāb amount of zakatable assets after deducting the liabilities then zakat is compulsory.

Debts receivables are treated as one’s potential wealth and regarded as a strong debt as one is certain of receiving payment of such a debt.

Zakat on strong debts is governed by the following laws: 

a.      At the time of calculating zakat if the debt is not received then zakat is not obligatory on that debt.

b.     Once the payment of the debts is one-fifth or more of the nisāb then zakat becomes due on that amount received. The zakat will be calculated for the present year as well as the previous years.

c.      If someone receives the complete debt in a lump sum, then zakat will be paid on the whole amount for that year and the previous years. [1]

d.     It is permissible to discharge zakat on debt receivables before the zakat becomes due on it. In essence, if one pays 2.5% on the debt receivable every year before receiving payments, then one would not have to pay zakat for the past years upon receiving payments.

e.      If the credit extended becomes a bad debt (i.e there is no hope of receiving it) then there is no zakat wajib on such debt.[2]

And Allah Ta’āla Knows Best

Mawlana Faisal bin Abdul Hameed
Student, Darul Iftaa
Canada

Checked and Approved by,
Mufti Ebrahim Desai.
www.daruliftaa.net