Q. Some banks charge interest or usury on the loans they give to their clients, but call it “service charge”. How does this affect the transaction? Is it still forbidden? May I also ask whether zakah is payable every year, or once in a lifetime for the same property?
A. Ali
A. It is the transaction itself that determines its own permissibility, not the name we give to it. If a loan is repaid in excess of its principal amount as a result of the delay in its repayment, then the transaction is usurious. If a bank calls this excess a “service charge”, then the bank is merely covering up the usurious nature of its transaction.
I am only stating here the principle, but every type of transaction should be given a ruling according to what it involves. We cannot slam a single verdict on all. It may be that some banks use the name “service charge” to refer to an aspect of some permissible transactions. We cannot call such charge forbidden because other banks use it in a usurious sense.
Zakah is payable every year, even if one holds the same property for ten or twenty years, or even longer. It is only people who try to evade zakah payment that claim it to be payable once only in a lifetime.
Savings and Zakah
Q. A person adds to his savings every month. Please comment on how he should calculate his zakah.
I. Parvez
A. Everyone should have a zakah date, which is the date when he first owned an amount equivalent to the threshold of zakah, determined at 85 grams of gold. Every year, on that date, you calculate what you have. If it is over this threshold, you pay your zakah on the entire amount, even though some of the money might have been with you for only a few days. Suppose that last year you had a saving of 10,000 riyals, and you paid your zakah for this amount. During the year you added to your savings different amounts, ranging from 50 to 300 riyals every month, and on your zakah date this year you have 12,000 riyals, you pay your zakah on this amount, even though you added your last savings only one month ago.
Do not forget that by making this addition, you are a little richer and you have paid all your living expenses. You are in a much better position than many people. To express your gratitude to God for giving you this much, you pay your zakah to help those who are less fortunate than you.
Zakah on Shares, Investments
Q. Earlier this year I liquidated my investment in interest-bearing accounts and placed them in a sort of investment which is locked for several years. I do not have any access to this money for the duration of the fund, but I expect to receive profits at the end of this period. Could you please let me know what zakah will be due from me on this investment?
Ali, Jeddah
A. Money that is locked in an investment of this type is liable to zakah when the investment matures. So, when you receive your money back on its date of maturity, both capital and profits are zakatable at the rate of 2.5 percent. To say that it is liable to zakah every year is to place an undue hardship on the owner who may have little else to pay zakah from while the investment is locked.