A share is part ownership of a company. So the question is not only what the share is worth, but what you actually own through it. Scholars answer this in two ways, and the right one depends on why you hold the share.
If you hold shares to sell them
Shares bought for trading, to profit from a rise in price, are treated like a trader's stock. Zakat is due at 2.5% of their full market value on the day your Zakat year completes. Most active investors fall into this group.
If you hold shares for the long term
Shares held for dividends rather than resale are treated differently. Here you pay Zakat only on your share of the company's zakatable assets, such as its cash, receivables and stock held for sale. Buildings, machinery and other fixed assets used to run the business are excluded.
To use this method, divide the company's zakatable assets by the number of shares in issue, multiply by the shares you hold and apply 2.5%. The figures come from the latest published balance sheet. If they are not available, many scholars advise paying on the full market value to be safe.
Mutual funds
A fund unit is a share in a pool of investments. For most investors the simplest approach is to pay Zakat on the value of their units on their Zakat date. Some Shariah-compliant funds publish the zakatable portion of each unit, which lets long-term investors use the second method.
What happens at your bank
In Pakistan, Zakat is deducted at source on the first of Ramadan from certain savings accounts and investments held by Muslim citizens whose balance is above the official Nisab. A person who holds that Zakat is not due on them under their school of thought can file a declaration on form CZ-50 to be exempt from the deduction. Zakat deducted at source counts toward what you owe, so subtract it from your own calculation.
Use our calculator to work out the rest of your Zakat, and ask a scholar if you hold shares in many companies or through a business.
