Bonds are non-shariah compliant investment due to the interest element it generates. If one is in possession of these financial instruments, zakat will be payable on the capital amount invested. However, should they also pay zakat on the interest they are receiving?
First, let us categorise haram income into two categories.
- Those that are haram in itself such as alcohol and pork. Zakat is not due on them.
- Those that are halal but have been acquired in a haram manner, such as the wealth acquired through stealing, or money acquired through interest. Bonds fall under this category.
The scholars differ as to whether this category is zakatable or not.
According to the Hanafis, Malikis, Shafi’is, Hanbalis and most contemporary scholars, zakat is not payable on such wealth. The rationale behind it is that the ownership of such wealth is not recognised by shariah. Zakat is only due on wealth which ownership has been fully established, which is not the case when possessing assets such as bonds.
On the other hand, Ibn Taymiyyah believed zakat must still be paid on such wealth. Among the contemporary scholars, Abdullah bin Muni’ is of the same opinion. They argue that even if the wealth is haram, the poor recipients of zakat have a claim over it.
And Allah knows best!
(Mufti) Billal Omarjee