Zakat on money invested in Mutual Funds

21-11-2007 | IslamWeb

Question:

A salam Alaikum Wa Rahmatul Allah Wa Barakatuh. Your fatwa # 88050 does not answer the question about Mutual Funds. In America, Mutual Funds are financial tools people purchase similar to a degree to stocks and Bonds in the Banking industry. cash values can go up or down through time. Please give new fatwa. Thank you

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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.

 

The ruling of participating in these Mutual Funds depends on the activity of this Fund and its compliance with the religious requirements in investing the money of the participants.

This becomes evident in the terms and conditions which both parties sign when concluding the contract.

For instance, it is forbidden to participate in Funds which invest its money in banks that deal with Riba (interest and/or usury) or which buy forbidden shares of companies, or other forbidden transactions.

The activity of most of investing Funds that exist today is based on such forbidden transactions.

If a person wants to pay Zakat on his share in one of these Funds, then he should consider it as a tradable item. Its price should be valued according to the market price at the time when Zakat is due, and other money and tradable items which a person has should be added to it, including the profit which resulted from it, if any, then he should pay Zakat on all this if it reaches the Nisaab (the minimum amount liable for Zakat) when a whole lunar year elapses on it.

Allaah Knows best.