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Islamic Methodology in History by Fazlur Rahman
Islamic Methodology in History

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How does a Trader Calculate Zakah on Commercial Goods?

1- He evaluates the merchandise with him according to its present worth.

2- He adds whatever currency he has to this, whether this is for business or otherwise.3- He adds whatever money he has loaned and has been guaranteed of its settlement.4- He subtracts from this sum the amount he owes.5- He then pays Zakah on whatever is left and this is one-fourth of a tenth or 2.5%.- Compulsory Zakah is (the value of commercial goods + currencies + expected/ guaranteed returns on monies loaned – the money which the trader owes) x payable Zakah of 2.5%.- In order to calculate Zakah on trade, the assets upon which Zakah is payable are inventoried and estimated on the day their Zakah is due, by using the statement of the financial position- the budget - regardless of the presence of profit or loss in the profit and loss account.- Materials used for packaging are not estimated alone if they were not bought for the sole intention of being sold individually. If, however, they were used to sell trade goods, then they should be estimated if they increase the value of those goods, such as special bags (packagings that are used to store the trade goods in etc). But if they do not increase the value, as for instance plain paper bags, then they are not included in the evaluation.- The evaluation for each trader - whether a wholesaler or a retailer - is according to the price with which he can usually purchase the goods at the end of the Hawl (i.e. one Hijri year; 1 year Hijri = 354.5 days) i.e. the replacement value, which is different from the sale price (the market value), the historical cost (cost at the time of purchase) and the book value.[ Refer to: Recommendations and decisions of the Seventh Symposium on Contemporary Zakah Issues 1417 Hijri -1997 Gregorian]- If prices change between the day Zakah is due and the day it is paid, the price considered shall be that of the day it is due, whether the price has increased or decreased.- Zakah of transferred goods before taking possession of them is the responsibility of its owner. Ownership of the purchased goods is realized according to how or where they are received. These purchased goods which are on their way, if purchased, for example, on the basis of delivery at the port of the seller, it enters into the buyer’s ownership once it is delivered to the shipper. But if it was purchased on the basis of delivery in the port of the buyer, it enters into ownership upon reaching the port of arrival.- If the traded money includes different currencies, such as gold or silver, it should be estimated to decide on the amount that must be paid in the currency in which the merchant trades to evaluate his trade goods according to the prices prevailing on the day the Zakah is due.- The Zakah on trade goods that the buyer pays for in advance, but does not take immediate possession of, is not obligatory for the buyer before taking possession of them, but it is still due from the seller. know zakat al mal in islamkingdom

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