Q.1. I have recently bought two pieces of land, one to build a house for my use, and the other I will be holding for a few years and then will sell it at good profit, I hope, so that I can build this house. What zakah I am liable to pay for these?

Q.2. If a person lends money to another, and it will take more than a year to repay the loan, is the lender liable to zakah on the amount of the loan?

A Nadeem

(Name and address withheld)

A.1. A piece of land bought for resale at a profit is normally treated like commercial commodities, which are liable to zakah on their market value at the time when zakah is due. A businessman must evaluate the goods he has in his shop or supermarket, and pay zakah on the basis of the current value of the goods. Similarly, if one owns a land which he is offering for sale and will sell it when he has a reasonable price, he should pay zakah on its value on his zakah date.

However, in the case the reader asks about, the land will not be sold for a long while. In this case, it is similar to unsaleable goods which a businessman may hold for months or years until they are sold. In this case, zakah is payable only when the land or the goods are sold. The liability is for the whole sale price once only. This means that if the reader sells his land after five years at ten times the price he paid for it, he pays zakah once only at 2.5 percent of the sale price.

A.2. If the borrower needs the loan for a long time, but acknowledges his debt and remains able to repay it if the lender requests repayment, then the lender must pay zakah for the amount of the loan together with the rest of his zakah every year. Even if the borrower keeps the loan for ten years, and the lender agrees, but is always able to effect repayment, the lender pays zakah on the amount of the loan. In this case, the loan is available to him but he agrees to extend the loan period.

On the other hand, if the borrower is insolvent, unable to repay if the loan is called, the lender does not pay zakah until the debt is settled. In this case, we are talking about money considered to be a dead debt. Zakah is normally taken from money that is liable to grow. Suppose you have lent SR10,000 to someone and he was in a very hard position for several years, but then things opened up for him and he pays you your loan back after five years of receiving it, you pay zakah on this amount once only.

Arab News Islam 17 February 2003