Zakat on ETFs
The question of Zakat on ETFs confuses many Muslims who invest through Exchange-Traded Funds like SPY, VOO, VTI, QQQ, or sector-specific ETFs. Do you pay Zakat on ETF holdings? How do you value ETFs that trade throughout the day with constantly changing prices for Zakat calculation? Should you use the bid price, ask price, or closing price? What about ETF expense ratios and tracking error? Is there a difference between stock ETFs and bond ETFs for Zakat? How do creation and redemption mechanisms affect ETF pricing and Zakat? What about international ETFs, commodity ETFs, or leveraged ETFs? This comprehensive guide answers every question about Zakat on ETFs with complete clarity for Muslim investors using exchange-traded funds.
The critical truth about Zakat on ETFs is this: ETF investments holding equity stocks are zakatable wealth that must be included in your annual Zakat calculation when your total wealth exceeds nisab for one complete lunar year. Whether you own SPDR S&P 500 ETF Trust (SPY), Vanguard Total Stock Market ETF (VTI), Invesco QQQ Trust (QQQ), or iShares Core S&P 500 ETF (IVV), these are equity investments representing proportional ownership of underlying companies. You value ETFs at closing market price on your Zakat date and include that value with all other zakatable assets for a comprehensive calculation. This guide explains exactly how Zakat on ETFs works, why intraday price fluctuations are irrelevant for annual Zakat, how ETFs differ from mutual funds structurally but not for Zakat purposes, and the correct Islamic method backed by authentic Quranic and Hadith evidence specifically applied to modern exchange-traded fund structures.
Critical misconception: Intraday trading does NOT exempt ETFs from Zakat
Many Muslim investors mistakenly believe that because ETFs trade throughout the day on stock exchanges with constantly changing prices, or because ETFs have creation and redemption mechanisms that differ from mutual funds, they do not owe Zakat on ETF holdings or that Zakat calculation is too complex. This is completely incorrect. ETFs are equity investments you own. Whether the ETF is SPY trading at $485 or VTI trading at $267, whether you can buy or sell at any moment during market hours, the shares belong to you and represent zakatable wealth equal to your proportional ownership of all underlying stocks in the ETF.
If you have been excluding ETFs from your Zakat calculation because of their exchange-traded structure or intraday liquidity, you have been underpaying your Islamic obligation and must correct this immediately. Read this complete guide to understand the correct method for Zakat on ETFs according to authentic Islamic scholarship applied to modern exchange-traded fund structures.
Understanding
What ETFs actually are for Zakat purposes
Understanding the nature of exchange-traded fund investments clarifies why they are zakatable assets.
ETFs are baskets of stocks that trade like individual stocks
When discussing Zakat on ETFs, you must first understand what ETF ownership represents in Islamic terms. An Exchange-Traded Fund is an investment fund that holds a basket of securities (typically stocks) and trades on stock exchanges throughout the day just like individual stocks. When you buy shares of SPY (SPDR S&P 500 ETF Trust), you become a proportional owner of all 500 companies in the S&P 500 index through the ETF structure. When you buy shares of VTI (Vanguard Total Stock Market ETF), you own proportional slices of over 3,500 US companies across all market capitalizations.
From a Zakat perspective, ETF shares represent equity wealth you possess. The shares have measurable market value that fluctuates continuously during trading hours based on supply, demand, and underlying stock prices. You can buy or sell ETF shares at any moment the market is open through any brokerage. This makes ETFs highly liquid zakatable wealth, fundamentally identical to owning individual stocks directly. The exchange-traded structure, intraday pricing, creation/redemption mechanism, and authorized participant system do not change the fact that you own investment assets with current market value representing company ownership. Islamic scholars agree that equity investments including ETFs are subject to Zakat when total wealth meets nisab and completes hawl.
How ETF ownership works for Zakat
You invest $10,000 in Vanguard Total Stock Market ETF (VTI) when it trades at $265 per share. You purchase 37.74 shares. The ETF holds over 3,600 individual US stocks representing the entire investable US equity market including Apple, Microsoft, Amazon, Google, Tesla, and thousands of smaller companies weighted by market capitalization. Your 37.74 shares mean you own a proportional slice of all 3,600+ stocks. For Zakat on ETFs, you do not track the 3,600 underlying stocks individually. Instead, you value your 37.74 shares at current market price. If VTI rises to $292 over the year, your holding is worth 37.74 × $292 = $11,020.08. This total value gets included in your zakatable wealth calculation on your Zakat date.
Intraday trading and liquidity do not affect Zakat obligation
The defining characteristic of ETFs versus traditional mutual funds is that ETFs trade on exchanges throughout the day with prices that fluctuate second by second, while mutual funds only price once per day at market close. Some investors mistakenly think this intraday liquidity and price volatility complicate or somehow eliminate Zakat obligation. This is wrong. The trading mechanism is completely irrelevant for Zakat purposes. Zakat applies to wealth you own, regardless of how frequently you can trade it or how volatile its price is during the day.
Whether an ETF trades every second on the NASDAQ with massive volume or is a thinly traded niche ETF with wide bid-ask spreads, both represent equity ownership subject to Zakat. The liquidity advantage of ETFs over mutual funds matters for portfolio management and trading costs, but makes zero difference for Zakat calculation. ETFs holding equity stocks are zakatable at current market value. Learn more about valuing different investment types in our Investments guide.
Annual calculation for ETF wealth
Calculate Zakat once per year on total ETF value at closing price
Stop worrying about intraday price swings. Use the Islamic annual method on your Zakat date.
Calculate Your Zakat →ETF types
Stock ETFs, bond ETFs, commodity ETFs, and specialty categories
How to properly handle different ETF types when calculating Zakat.
Stock ETFs holding equity are fully zakatable
Stock ETFs are the largest and most common category of ETFs. These hold portfolios of equity stocks. SPDR S&P 500 ETF Trust (SPY), Vanguard Total Stock Market ETF (VTI), Vanguard S&P 500 ETF (VOO), iShares Core S&P 500 ETF (IVV), Invesco QQQ Trust (QQQ), and thousands of other stock ETFs provide exposure to various equity indexes, sectors, and strategies. For Zakat on ETFs, stock ETFs are unquestionably zakatable because they hold equity stocks representing ownership in companies.
Calculate Zakat on stock ETFs by checking closing price on your Zakat date. If you own 75 shares of SPY and the closing price on your Zakat date is $487, your holding is worth 75 × $487 = $36,525. Include this $36,525 in your total zakatable wealth along with cash, other investments, gold, and any zakatable assets. The fact that SPY is the most heavily traded ETF in the world with trillions in assets makes no difference for Zakat. It represents equity ownership and is fully zakatable.
Example: Broad market stock ETFs for Zakat
Your ETF portfolio: Vanguard Total Stock Market ETF (VTI): 120 shares at closing price $268 = $32,160. SPDR S&P 500 ETF Trust (SPY): 35 shares at closing price $486 = $17,010. Total stock ETF value: $49,170. You also have $16,800 in checking, $24,500 in savings. Total wealth: $90,470.
Nisab is $515. Your wealth exceeds nisab. Zakat calculation: $90,470 × 0.025 = $2,261.75. You pay $2,262. Your stock ETFs represented 54% of your zakatable wealth and were correctly included using closing prices from your Zakat date.
Example: Sector-specific stock ETFs
You own Invesco QQQ Trust (QQQ, technology-heavy): 85 shares at $425 = $36,125. Vanguard Health Care ETF (VHT): 140 shares at $278 = $38,920. Both are sector-focused stock ETFs. Combined value: $75,045.
Add cash ($12,300), savings ($18,600), and gold ($5,800). Total zakatable wealth: $111,745. Nisab: $505. Zakat: $111,745 × 0.025 = $2,793.63. Sector focus is irrelevant. All stock ETFs are zakatable at current closing price.
Bond ETFs are haram and should not be owned
Bond ETFs hold portfolios of bonds, which are interest-bearing debt securities. When you own a bond ETF, you are lending money to governments or corporations in exchange for fixed interest payments. This is riba, which is explicitly prohibited in Islam. iShares Core US Aggregate Bond ETF (AGG), Vanguard Total Bond Market ETF (BND), iShares 20+ Year Treasury Bond ETF (TLT), and all other bond ETFs contain haram securities.
Muslims should not invest in bond ETFs at all. If you currently hold bond ETFs, you must sell them immediately and redirect capital to halal investments. For Zakat purposes, the presence of haram wealth does not eliminate Zakat obligation. You still owe Zakat on haram wealth if your total wealth exceeds nisab for hawl. However, any gains from haram investments should be purified by donating them to charity, not counted as Zakat. Only donate gains to charity, keep your original principal to reinvest in halal assets. Similar principles apply to all haram holdings as explained in our Investment Zakat guide.
Specialized ETFs
International ETFs, commodity ETFs, and alternative asset ETFs
Understanding Zakat on ETFs beyond traditional US equity holdings.
International stock ETFs tracking foreign markets are zakatable
International ETFs provide exposure to stocks outside the United States, tracking indexes covering developed markets, emerging markets, or specific countries. Vanguard Total International Stock ETF (VXUS), iShares Core MSCI EAFE ETF (IEFA), iShares Core MSCI Emerging Markets ETF (IEMG), Vanguard FTSE Developed Markets ETF (VEA), and iShares MSCI China ETF (MCHI) are popular international stock ETFs. For Zakat on ETFs, international equity ETFs are zakatable just like domestic ETFs because they hold stocks representing company ownership.
Calculate Zakat on international stock ETFs by valuing at current closing price on your Zakat date. If you own 580 shares of VXUS trading at $67.50, your holding is worth 580 × $67.50 = $39,150. Include this in your zakatable wealth calculation. The geographic location of underlying companies (Europe, Japan, China, India, Brazil, etc.) is irrelevant for Zakat purposes. Equity ownership is equity ownership regardless of country. All international equity ETFs are zakatable.
Example: Combining US and international stock ETFs
Your globally diversified ETF portfolio: SPDR S&P 500 ETF (SPY): 95 shares at $485 = $46,075. Vanguard Total International Stock ETF (VXUS): 720 shares at $68 = $48,960. iShares Core MSCI Emerging Markets ETF (IEMG): 1,150 shares at $52 = $59,800. Total ETF value: $154,835. You follow a three-fund strategy with approximately 30% US, 32% international developed, 38% emerging markets. On your Zakat date, all ETFs are valued at closing prices. Add cash holdings ($18,900) and savings ($26,300). Total zakatable wealth: $200,035. Nisab is $520. Zakat due: $200,035 × 0.025 = $5,000.88. Your international ETFs are included exactly like your US ETF despite holding stocks from 50+ foreign countries.
Commodity ETFs and gold ETFs have specific Zakat considerations
Commodity ETFs provide exposure to physical commodities like gold, silver, oil, natural gas, or agricultural products. SPDR Gold Shares (GLD), iShares Silver Trust (SLV), United States Oil Fund (USO), and other commodity ETFs have different structures. Some hold physical commodities directly, others use futures contracts. For Zakat on ETFs holding physical gold or silver, these are zakatable as precious metals. ETFs holding gold are zakatable because gold itself is zakatable, not because of equity ownership.
GLD (SPDR Gold Shares) holds physical gold bars and represents fractional gold ownership. Each share represents approximately 0.09 ounces of gold. For Zakat purposes, GLD is zakatable as gold, not as equity. Value your GLD shares at current market price and include in zakatable wealth. Other commodity ETFs holding oil, natural gas, or agricultural commodities through futures contracts are more complex. Consult Islamic scholars about specific commodity ETF structures, as futures contracts raise separate Shariah concerns beyond Zakat calculation.
All stock ETFs included
US, international, and sector ETFs calculated together annually
One simple annual calculation on total ETF portfolio value at closing prices.
Use Calculator →Valuation
How to value ETFs correctly for Zakat calculation
Understanding closing prices, NAV, bid-ask spreads, and the correct valuation approach.
Use closing price on your Zakat date for ETF valuation
A critical principle for Zakat on ETFs is that you calculate based on the official closing price on your Zakat date, not intraday prices, opening prices, or estimates. ETF prices fluctuate continuously during trading hours from 9:30 AM to 4:00 PM Eastern Time. The price at 10:00 AM might be $485, at noon $487, at 2:00 PM $483, and closing at 4:00 PM at $486. For Zakat purposes, only the official closing price at 4:00 PM matters.
Check your brokerage account after market close on your Zakat date to see the closing price. If your Zakat date is March 15, 2025, and that is a Monday trading day, use the closing price from 4:00 PM Eastern on March 15. Do not use prices from March 14 or March 16. Do not use the high or low price from March 15. Use only the official closing price. If your Zakat date falls on a weekend or market holiday when markets are closed, use the most recent closing price from the last trading day.
Example: Closing price for ETF Zakat calculation
Your SPDR S&P 500 ETF Trust (SPY) holding: 142 shares. Your Zakat date is 1st Ramadan 1446, which corresponds to February 28, 2025 (Friday). You check closing price after 4:00 PM Eastern. SPY closed at $489.34. Your total value: 142 × $489.34 = $69,486.28. This is the amount you include in your zakatable wealth calculation. The fact that SPY traded as high as $492 and as low as $487 during the day is completely irrelevant. The intraday high, low, opening price, and average price do not matter. Only the official closing price of $489.34 matters for Zakat on this ETF.
NAV versus market price for ETFs
ETFs have two prices: market price (what ETF shares trade for on exchanges) and Net Asset Value or NAV (the actual value of underlying holdings divided by shares outstanding). For most heavily traded ETFs like SPY, VOO, VTI, or QQQ, market price and NAV are virtually identical, differing by only pennies. Creation and redemption mechanisms keep ETF market prices closely aligned with NAV. Authorized participants arbitrage away any significant premium or discount.
For Zakat on ETFs, always use the market price (closing price) from your brokerage account, not the NAV figure published by the fund provider. Your brokerage shows the actual price you could sell your ETF shares for, which is the market closing price. This is your real wealth. For thinly traded or niche ETFs where market price might deviate more from NAV, still use the actual market closing price you could sell at, as this represents the realizable value of your holding. Learn more about investment valuation in our Investment guide.
Bid-ask spreads are irrelevant for annual Zakat calculation
When you look at real-time ETF prices during the trading day, you see both a bid price (what buyers are willing to pay) and an ask price (what sellers are asking for). The difference between bid and ask is the spread. For heavily traded ETFs like SPY or VTI, spreads are typically $0.01 or $0.02. For less liquid ETFs, spreads might be $0.10 or more. Some investors worry about which price to use for Zakat calculation.
This concern is misplaced. For annual Zakat on ETFs, you use the official closing price, which is the last traded price when markets close at 4:00 PM. This closing price is neither the bid nor the ask; it is the actual price at which the final transaction occurred. Bid-ask spreads are a trading cost concern for active traders, but completely irrelevant for annual Zakat calculation on a specific date. Use the closing price shown in your brokerage account after market close.
Distributions
ETF dividend distributions, capital gain distributions, and trading activity
How ETF distributions and active trading affect Zakat calculation.
ETF distributions do not trigger immediate Zakat
ETFs make distributions to shareholders periodically, typically quarterly. Dividend distributions occur when stocks held by the ETF pay dividends and the ETF passes dividend income to shareholders. Capital gain distributions occur when the ETF sells stocks at a profit (due to rebalancing or redemptions) and passes gains to shareholders. For Zakat on ETFs, these distributions do not create immediate Zakat obligations at the moment they occur. They are income entering your wealth, not separate Zakat events.
Distributions are typically paid as cash into your brokerage account unless you have automatic reinvestment enabled. If paid as cash, the distribution amount merges with your cash holdings and is included in Zakat calculation on your annual Zakat date through your cash balance. If automatically reinvested to purchase more ETF shares, the distribution increases your total share count, which increases your total ETF value, and is included in Zakat calculation through your increased shareholding on your Zakat date. Either way, distributions are accounted for annually, not immediately upon receipt.
Example: ETF distribution with reinvestment
December 20th: Your Vanguard Total Stock Market ETF (VTI) declares a dividend distribution of $0.87 per share. You own 250 shares. Distribution amount: $0.87 × 250 = $217.50. You have automatic reinvestment enabled. The $217.50 is used to purchase additional shares at market price of $268.50. Additional shares acquired: $217.50 ÷ $268.50 = 0.81 shares. Your new total: 250.81 shares. On your Zakat date in Ramadan, you own 250.81 shares at closing price $275. Total value: 250.81 × $275 = $68,972.75. The dividend distribution is reflected in your increased share count. You do not track the $217.50 distribution separately for Zakat purposes.
Active ETF trading does not change annual Zakat methodology
Some investors actively trade ETFs, buying and selling frequently to try to time markets or implement tactical strategies. You might buy SPY in January, sell it in March, buy QQQ in April, sell in June, and so on. Other investors hold ETFs for decades without trading. For Zakat on ETFs, trading frequency is completely irrelevant. Whether you held the same ETF shares for the entire year or traded dozens of times, Zakat calculation is identical: value your ETF holdings on your Zakat date at closing price.
If you sold ETF shares during the year and spent the proceeds or kept as cash, that is reflected in your wealth on Zakat date. If you sold one ETF and bought another, your Zakat date calculation includes whichever ETFs you own at that moment. The historical trading activity, realized gains or losses, and portfolio turnover during the year do not matter. Only what you own on your specific Zakat date matters, valued at that date's closing prices.
Real situations
Detailed examples of Zakat on ETFs calculation
Step by step walkthroughs showing exactly how Muslim investors calculate Zakat on ETF holdings.
Core-satellite ETF portfolio investor
Background: Ahmed uses a core-satellite strategy with low-cost broad market ETFs as the core and sector ETFs as satellites. He holds multiple ETFs across providers. His Zakat date is 1st Ramadan.
Holdings on Zakat date: Core holdings: Vanguard Total Stock Market ETF (VTI): 185 shares at $267 = $49,395. Vanguard Total International Stock ETF (VXUS): 420 shares at $68 = $28,560. Satellite holdings: Invesco QQQ Trust (QQQ, technology): 45 shares at $426 = $19,170. Vanguard Real Estate ETF (VNQ, REITs): 220 shares at $92 = $20,240. Total ETF value: $117,365. He also has $14,800 in checking, $22,400 in savings.
Zakat calculation: Total zakatable wealth: $117,365 + $14,800 + $22,400 = $154,565. Nisab is $510. His wealth exceeds nisab and remained above nisab for full lunar year. Zakat due: $154,565 × 0.025 = $3,864.13. He pays $3,864.
Key insight about Zakat on ETFs: Ahmed valued each ETF at closing price on his Zakat date regardless of provider (Vanguard vs Invesco) or category (broad market vs sector). His ETFs totaling $117,365 represented 76% of zakatable wealth. All stock ETFs are zakatable and valued identically using closing prices.
Young investor building ETF portfolio through fractional shares
Background: Zainab is 24 and contributes $600 monthly to SPDR S&P 500 ETF Trust (SPY) through fractional share purchasing at her brokerage. She started investing 16 months ago. She wants to understand when Zakat becomes due on her ETF accumulation.
Investment history: Total contributed over 16 months: $600 × 16 = $9,600. She bought SPY at varying prices throughout the period, averaging around $470 per share. Current holding: 20.43 shares (fractional shares enabled). Current SPY closing price on her Zakat date: $487. Total value: 20.43 × $487 = $9,949.41. Her unrealized gain is $9,949.41 - $9,600 = $349.41.
Other wealth: Checking account: $5,900. High yield savings account: $11,300. Emergency fund: $4,600. Total wealth: $9,949.41 + $5,900 + $11,300 + $4,600 = $31,749.41.
Nisab check: Nisab is $520. Her $31,749.41 far exceeds it. She crossed nisab 13 months ago when her total wealth first exceeded it. She has now been above nisab for more than one lunar year. Zakat is due for first time.
Zakat calculation: $31,749.41 × 0.025 = $793.74. She pays $794.
Key insight about Zakat on ETFs: Zainab contributed monthly buying fractional SPY shares but never paid Zakat monthly. Her Zakat obligation began when total wealth crossed nisab and remained above it for one lunar year. Her ETF holdings of $9,949.41 include all monthly purchases valued at current closing price, not individual purchase amounts. Fractional share ownership does not change Zakat methodology for ETFs.
Active trader with frequent ETF position changes
Background: Omar practices tactical asset allocation, frequently trading between different ETFs based on market conditions. He made 34 ETF trades during the past year. His Zakat date is 15th Shaban.
Trading activity: Throughout the year, he traded in and out of SPY, QQQ, VTI, IWM (small cap), EFA (international developed), EEM (emerging markets), and various sector ETFs. He realized $8,400 in capital gains from this trading activity. Some months he held 5 different ETFs, other months only 2.
Current holdings on Zakat date: SPDR S&P 500 ETF (SPY): 82 shares at $489 = $40,098. iShares Russell 2000 ETF (IWM, small cap): 190 shares at $218 = $41,420. Vanguard FTSE Emerging Markets ETF (VWO): 1,420 shares at $44 = $62,480. Total ETF value: $143,998.
Other assets: Cash from trading (temporarily high due to recent sales): $28,600. Checking: $6,800. Total wealth: $179,398.
Zakat calculation: Nisab is $515. His wealth far exceeds this. Zakat: $179,398 × 0.025 = $4,484.95. He pays $4,485.
Key insight about Zakat on ETFs: Despite 34 trades during the year and frequent position changes, Omar's Zakat calculation is straightforward. He values only the three ETFs he owns on his Zakat date at their closing prices. The 31 other ETF positions he held at various points during the year are irrelevant. Trading frequency does not complicate Zakat on ETFs. Annual calculation on current holdings is always the method.
Diversified investor with domestic and international ETFs
Background: Fatima maintains globally diversified ETF portfolio following modern portfolio theory. She holds US, international developed, and emerging market ETFs in specific allocations. Her Zakat date is 1st Muharram.
ETF holdings: Domestic: Vanguard S&P 500 ETF (VOO): 175 shares at $445 = $77,875. International Developed: iShares Core MSCI EAFE ETF (IEFA): 1,080 shares at $77 = $83,160. Emerging Markets: iShares Core MSCI Emerging Markets ETF (IEMG): 1,340 shares at $52.50 = $70,350. Total ETF value: $231,385.
Portfolio allocation: Approximately 34% US, 36% international developed, 30% emerging markets. This matches her target allocation based on global market cap weightings.
Other assets: High yield savings: $32,100. Checking: $11,600. Gold jewelry: $7,800. Total wealth: $282,885.
Zakat calculation: Nisab is $525. Her wealth far exceeds this threshold. Zakat: $282,885 × 0.025 = $7,072.13. She pays $7,072.
Key insight about Zakat on ETFs: Fatima's globally diversified ETF portfolio spanning US, European, Asian, and emerging market stocks is valued comprehensively at closing prices on her Zakat date. Geographic diversification across 40+ countries does not complicate Zakat calculation. All stock ETFs regardless of region are zakatable and valued identically at current market closing price.
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Open Calculator →Islamic evidence
Quran and Sahih Hadith establishing Zakat principles
Authentic textual sources proving Zakat is obligatory on investment wealth including ETFs.
Quran
Establish prayer and give Zakat
Quran 2:43
Allah commands establishment of prayer and payment of Zakat together as fundamental obligations. Zakat is required for Muslim investors with qualifying wealth from ETFs once conditions are met.
Quran
Give Zakat from what We provided
Quran 2:110
Believers are commanded to give Zakat from provision Allah granted. ETF wealth is provision, and when total wealth including ETFs exceeds nisab for hawl, Zakat becomes obligatory on the total.
Quran
Take from their wealth a charity
Quran 9:103
Allah instructs taking Zakat from wealth to purify it. This verse establishes Zakat is on accumulated wealth in possession, which includes ETF investments valued at current market price.
Quran
Rights of the needy in wealth
Quran 51:19
In the wealth of believers is a right for those who ask and those deprived. ETF wealth that reaches nisab for hawl must have Zakat paid from it to fulfill this divine right.
Hadith
Islam built on five pillars
Sahih al-Bukhari 8
Prophet Muhammad, peace be upon him, established Zakat as one of five pillars of Islam, making it mandatory for Muslims with qualifying wealth regardless of whether wealth is held as individual stocks, mutual funds, or exchange-traded funds.
Hadith
No Zakat until wealth completes one year
Sunan Abu Dawud 1573
The Prophet (peace be upon him) clarified wealth must remain in possession for one complete year before Zakat is due. This establishes hawl requirement for ETF investments, proving Zakat calculation is annual, not triggered by purchases or sales.
Hadith
Zakat is a right in wealth
Sahih al-Bukhari 1395
The Prophet (peace be upon him) taught that Zakat is a right Allah placed in the wealth of the rich for benefit of the poor. ETF holdings are wealth subject to this right when above nisab for hawl.
Hadith
Warning about withholding Zakat
Sahih Muslim 987a
Severe consequences warned for those who possess zakatable wealth and do not pay Zakat. This emphasizes the serious obligation to calculate and pay Zakat correctly on all accumulated wealth including ETF investments.
Scholarly consensus on equity investments and Zakat
All four major schools of Islamic jurisprudence (Hanafi, Maliki, Shafi, Hanbali) agree that Zakat applies to trade goods and assets held for growth. Exchange-Traded Funds are modern investment vehicles that hold baskets of securities, typically equity stocks representing proportional ownership in companies. Islamic scholars addressing contemporary financial instruments consistently conclude that ETF shares are zakatable assets because they represent ownership of underlying companies through the fund structure, have liquid market values, and are held for investment growth. The exchange-traded mechanism, intraday liquidity, and creation/redemption process do not eliminate Zakat obligation. There is scholarly consensus that equity investments including ETFs are subject to Zakat when total wealth meets nisab and completes hawl. The annual closing price valuation method for Zakat on ETFs is consistent with 1400 years of Islamic jurisprudence applied to modern exchange-traded fund structures.
FAQ
Frequently asked questions about Zakat on ETFs
Direct answers to the most common questions Muslim investors have about Zakat on ETF holdings.
Do I pay Zakat on ETFs I own?▾
Yes, if your total zakatable wealth including ETF investments exceeds nisab and has been held for one complete lunar year. ETFs holding stocks are zakatable assets. You value them at current market price on your Zakat date and include that value when calculating total zakatable wealth.
How do I calculate Zakat on ETFs?▾
On your annual Zakat date, check the closing share price of your ETFs. Multiply total shares owned by closing price per share to get total ETF value. Add this to all other zakatable assets (cash, other investments, gold). If total exceeds nisab and was above nisab for full lunar year, pay 2.5% Zakat on the complete total.
Is there a difference between ETFs and mutual funds for Zakat?▾
No functional difference for Zakat purposes. ETFs and mutual funds holding the same stocks are valued identically. ETFs trade intraday like stocks with bid-ask spreads, mutual funds use end-of-day NAV, but Zakat calculation is the same for both. Both are zakatable equity investments valued at current market price on Zakat date.
Do I pay Zakat on bond ETFs?▾
Bond ETFs contain interest-bearing securities which are haram. You should not invest in bond ETFs at all. If you currently hold them, sell immediately and redirect to halal investments. Any gains from haram investments should be purified by donating to charity, not counted as Zakat.
What about Zakat on sector ETFs like technology or healthcare ETFs?▾
Sector ETFs holding equity stocks are zakatable. Technology ETFs (QQQ, VGT), healthcare ETFs (VHT), financial ETFs (VFH), or any sector ETFs holding stocks represent company ownership and are fully zakatable. Value at current closing price on Zakat date and include in zakatable wealth.
Should I use closing price or intraday price for ETF Zakat calculation?▾
Use the official closing price from your Zakat date. ETF prices fluctuate throughout the trading day, but for Zakat purposes, use the final closing price after market close on your specific Zakat date. Do not use intraday highs, lows, or mid-day estimates.
Do ETF expense ratios affect Zakat calculation?▾
No. Expense ratios are management fees charged by ETF providers, typically very low (0.03% to 0.20% annually). These fees are already reflected in ETF share price or NAV. You calculate Zakat on your ETF's current market value, which already accounts for all fees. Expense ratios do not require separate adjustment.
Are international ETFs zakatable?▾
Yes. International ETFs (VXUS, EFA, VWO, IEMG) tracking developed markets, emerging markets, or specific foreign countries are zakatable just like domestic ETFs. They hold equity stocks representing company ownership. Value at current price on Zakat date and include in zakatable wealth calculation.
What if my ETFs are in a 401k I cannot access?▾
Most Islamic scholars say inaccessible retirement accounts like 401k are not currently zakatable because you cannot control or withdraw the funds without penalty. The ETFs inside 401k would not be included in Zakat until you reach retirement age and can access them. Minority opinion includes them because they legally belong to you.
What is the correct method for Zakat on ETFs?▾
The correct method is annual valuation at closing price. Choose one Zakat date on Islamic calendar. On that date each year, check closing price of all ETF holdings after market close. Calculate total value: shares × closing price. Add to all other zakatable assets. Compare total to nisab. If above nisab for full lunar year, pay 2.5% Zakat on complete total.
Implementation
Practical tips for managing Zakat on ETFs
Make your annual Zakat calculation simple and accurate with these strategies for ETF investors.
1. Choose your Islamic calendar Zakat date
Select one date on the Islamic lunar calendar for annual Zakat calculation. Many Muslims choose 1st Ramadan or 15th Shaban. Set a recurring reminder in your phone one month in advance. This gives you time to check brokerage statements, review ETF holdings, verify current closing prices, and compile information on all wealth sources before your Zakat date arrives.
2. Know your exact share counts for each ETF
If you trade ETFs frequently or use fractional shares, your holdings change throughout the year. On your Zakat date, log into your brokerage account and check exact current share counts for each ETF you own, including fractional shares to two decimal places. Multiply each ETF's shares by current closing price to get accurate total value.
3. Use closing prices after market close
Check ETF closing prices after 4:00 PM Eastern Time on your Zakat date. Do not use mid-day prices, opening prices, or bid-ask quotes. Most brokerage platforms display official closing prices within minutes of market close. If your Zakat date is a weekend or holiday, use the most recent closing price from the last trading day.
4. Eliminate bond ETFs from your portfolio
Before calculating Zakat, review your ETF holdings for Shariah compliance. If you hold bond ETFs (AGG, BND, TLT, etc.), you should sell these and redirect to halal stock ETFs immediately. Bond ETFs contain interest-bearing securities which are haram. Focus your portfolio on stock ETFs only.
5. Combine ETFs with all other assets
Your Zakat on ETFs should be part of comprehensive Zakat calculation including not just ETF holdings, but also bank account balances, individual stocks, mutual funds, gold jewelry, cryptocurrency, and money in any accessible form. Combine everything for complete calculation. Our calculator guides you through all categories.
6. Pay Zakat promptly after calculation
Once you calculate your Zakat amount, pay it promptly to eligible recipients. You can pay to Islamic charities, send to family members in need overseas, or distribute directly to poor Muslims you know. The obligation is fulfilled when money reaches eligible recipients. Record the amount paid and date for your personal records and future reference.
The core principle for Zakat on ETFs
Remember this simple truth: you hold ETF shares that trade throughout the day with fluctuating prices, but you calculate Zakat once per year. Your ETFs are investment wealth you own representing proportional ownership of underlying companies. When your annual Zakat date comes, you check total ETF value at closing price for each fund, add all other zakatable assets, compare total to nisab, and calculate 2.5% if conditions are met. This is the Islamic method that has worked for 1400 years for all types of wealth and continues to work perfectly for modern investors holding exchange-traded funds tracking various indexes, sectors, and markets.
Ready to calculate correctly
Calculate your Zakat on ETF wealth
Stop worrying about intraday price fluctuations and bid-ask spreads. Calculate your actual annual Zakat obligation on all accumulated wealth from ETFs, exchange-traded holdings, cash accounts, plus other zakatable assets. The process takes minutes with our comprehensive calculator designed for Muslim investors and ETF holders.
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Disclaimer: This guide provides general educational information about Zakat on ETFs based on widely accepted Islamic scholarly opinions and jurisprudential consensus from the four major schools of Islamic law. Individual circumstances vary significantly based on ETF types (stock vs bond vs commodity), providers (SPDR, Vanguard, iShares, Invesco), account types (taxable vs retirement), trading patterns (buy-and-hold vs active trading), international holdings, currency considerations, Shariah screening requirements, leveraged or inverse ETF structures, retirement account accessibility, and personal financial situations. For questions about complex ETF structures (leveraged ETFs, inverse ETFs, actively managed ETFs, thematic ETFs), commodity ETFs using futures contracts, cryptocurrency ETFs, inaccessible retirement accounts holding ETFs, or edge cases involving ETF liquidations, mergers, or creation/redemption mechanisms, consult qualified Islamic scholars who understand both Islamic commercial law and modern exchange-traded fund structures. This guide is designed to help the majority of Muslim ETF investors understand and fulfill their Zakat obligations correctly using established Islamic jurisprudence that has governed investment wealth for over 1400 years, now applied to contemporary exchange-traded fund structures and mechanisms.
About this Content
Written by the Zakat Finance editorial team. All content is based on authentic Islamic scholarship and is reviewed regularly to ensure accuracy. The content aims to provide guidance on Zakat calculation and does not replace advice from a qualified Islamic scholar.
Last updated: February 2026
Method note: We present common scholarly approaches to Zakat calculation, encouraging consultation with trusted scholars for personal cases.