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Fatwa CenterCalculating zakah when one is creditor and debtor
Question
Zakah question! I have savings amounting to around 200,000 riyal plus some gold that is above the nisab (minimum amount for a muslim net worth to be obligated to give zakat after having owned that value for a lunar year) level.
1) I have also given a loan to my brother to help him out for 100,000 riyal. He will pay me monthly in installments from his salary for a period of five years. He will pay monthly installments of 2,500 riyal.
2) I have purchased a flat for 700,000 riyal via a government loan, and will be paying it back to the government in installments for 20 years (more or less), and my installment is 3,000 riyal.
How should I calculate zakah? Shall I add the full amount of the loan given to my brother and deduct the full amount of the loan taken from the government (if I do this then there will be no zakah for me as the loan towards the government is bigger than the amount of my savings), or there is a portion that is to be added/deducted? May Allaah reward you.
Answer
All perfect praise be to Allaah, The Lord of the worlds. I testify that there is none worthy of worship except Allaah and that Muhammad 
is His slave and Messenger.
With regards to the debt that you owe (the government), the scholars differed in opinion whether or not it is to be deducted from the money on which you are obliged to pay the zakah. The view that we consider to be the preponderant one is the view of the Maaliki School, which is that if you have tradable items such as real estate property and so forth that reach the amount of the debt and you do not need them, then you should consider that they offset the debt and then pay the zakah on whatever remains. Please, refer to fatwa 116828.
If you do not have any tradable items that you may consider to offset the debt, then in such case you deduct it from the money on which you are obliged to pay zakah. However, if you pay zakah on all that you possess as a way of avoiding the difference of opinion and being on the safe side, then this is good.
As regards the loan that your brother owes you, then if you wish you may pay the zakah on it along with your money, or you may pay the zakah on it when you receive it in full for the past years.
As regards the gold, if it was intended for permissible beautification, then according to the view of the majority of the scholars, there is no zakah on it, but in order to be on the safe side, it is better to pay zakah on it. For more benefit, please refer to fatwa 89106.
In brief, you add the value of the debt that your brother owes you to the value of the gold if you wish to pay zakah on it, and you add all this to your possessions, then you pay the zakah at the beginning of every hawl (i.e. expiry of full lunar year over possessing the money), and if you wish to delay the zakah of the debt until you receive it, then this is also permissible.
In case the loan that you owe encompasses all that you possess, then you are not obliged to pay zakah according to the view of the majority of the scholars, but in order to be on the safe side, you may pay zakah in all cases in order to avoid the difference of opinion.
Allaah knows best.
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