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Fatwa CenterZakat on mortgaged gold
Question
Assalamu alaikum, I need a clarification regarding zakat on gold. My mother in law has pleadged (mortaged) gold and taken a loan on that gold. The repayment of the loan is for a period of 2 years. Does she have to pay zakat on the gold which is with the bank? jazak Allah.
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.
If the mortgaged gold which you mentioned in the question was bought in principle for beautification, (i.e. for a woman to wear and beautify herself with) then according to the view of the majority of the scholars 
it is not an obligation to pay Zakat on it. However, if Zakat is paid on it in order to be on the safe side, then this is more appropriate; for more benefit please refer to Fatwa 92469.
According to the view of the scholars who rule that it is an obligation to pay Zakat on gold used for adornment, being mortgaged does not exempt gold from paying Zakat on it if it meets the other conditions.
Zakat must be paid on the gold which you mentioned if it was bought for trade and was not bought for adornment and use, according to the consensus of the scholars .
Finally, it should be noted that it is forbidden to borrow money from banks which deal with Riba (interest and/or usury); whoever did so is obliged to repent. For more benefit, please refer to Fataawa 86371, 81364 and 82329.
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