- Zakat Calculation for the house with a due mortgage
- Planning to build a secondary suite in the basement and intend to rent it out in future.
- Property in India is valued really high due to passage of time and when bought it it was valued only 1% to 5% of current price
Bismillahi Ta’ala
Walaikum Assalam Warahmatullah
1.
a. Interest based mortgage is a sinful transaction, and should be concluded as soon as possible in favour of halal-suitable mortgages like Manzil or Eqraz.
b. Nonetheless, the general principle is that a debt is subtracted from the Zakatable Assets. This, however, is only for short-term debts. A long-term debt is not deducted from the Zakatable assets.
That being said, Fuqaha’ recognize that a portion of this long-term debt is still sought after from the individual. Some scholars have opted to limit this Zakat Deductable to only the month’s due for the mortgage in which the zakat is being calculated. Other mashayekh, including the stance of Darul Iftaa Canada, is that you can deduct up to a year worth of these payables.
Note: This amount does not include the interest payments one would give in that year.
2. Once the suite is rented out, then the income from that will be considered a zakatable asset.
3. [Assumption The question is about what price to use for calculating zakat. Since zakat is calculated for land/house bought with intent of resale, the answer reflects this]
For zakat calculation on a building which was bought to be resold, and the value of the property has appreciated, then zakat on it will be calculated based on current market value. Essentially, the value of stock in trade is that value that you would get if you liquidate it this instant. This would be the market price. Hence, you would include the entirety of this land value in your zakatable assets.
Wallahu A’lam
And Allah Ta’āla Knows Best
Mufti Faisal al-Mahmudi