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Fatwa CenterZakah on the profit earned from marchandise sale
Question
Is Zakat due on financial aid returns from school that was spent before the one year time frame for zakat to be due? and secondly if I made a profit in selling merchandise I worked on do I have to pay 2.5 % on it even if it didnt last one year and I dont remember the amount I spent on the products or supplies needed to make the item that was sold? since I am only supposed to pay on the extra money I made minus the expenses right? Please clarify this issue for me. Jazakum allahi khair
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, sallallaahu 'alyhi wa sallam, is His slave and Messenger.
With regard to the school financial aid returns that you mentioned, since it is spent before a whole lunar year is expired, then there is no Zakah (obligatory charity) due on it, because among the conditions for paying Zakah is that a whole lunar year should elapse on the money that reaches the Nisaab (the minimum amount liable for Zakah while possessing it).
As regards the profits from trade, then its due Zakah must be paid along with the Zakah on the initial capital as the profit takes the same ruling of the initial capital sum. The initial capital from trade should not be left until a whole lunar year elapses after possessing it. Rather, if it is earned even one day before a whole lunar year elapses after possessing the capital sum, then Zakah must be paid on it (the profit) along with the initial capital when a whole lunar year elapses after possessing it (the capital) on the condition that this capital money has reached the Nisaab, which is approximately the equivalent of 85 grams of gold.
What you mentioned in that the Zakah must be paid on the profit after deducting the expenses is not true. Rather, it is an obligation upon whoever has tradable items that reach the Nisaab even by adding it to the money that he possesses, to pay Zakah on these tradable items that are prepared for trade if a whole lunar year elapses after possessing them. So, he should pay the Zakah on the capital money and on whatever profit that is earned from it if it has remained until a whole lunar year elapses.
With regard to what is spent, then there is no due Zakah on it. Also, nothing is to be subtracted from the amount on which Zakah is due except the debts that a person owes, in which case he subtracts them from the money on which he must pay the Zakah, and then he pays Zakah on what remains if it reaches the Nisaab.
Therefore, the matter is easy. The tradesman should simply know the time when the Zakah must be paid which is the time when a whole lunar year elapses since he possessed his money, and then he estimates the tradable items that he has at hand and adds to them the profit he made thereof and subtracts the debts he owes, then pays the Zakah which is 2.5 %.
For more details, please refer to Fatwa 92234.
Allaah Knows best.
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