Zakat on Investments
Investments are common today: stocks, ETFs, mutual funds, and other portfolios. The key question for Zakat is not the label of the investment but what it represents in terms of wealth you own and how you intend to hold it.
This guide explains practical methods people use, the difference between trading style holdings and long term holdings, how dividends fit in, and how to calculate in a clean consistent way.
Main decision
Trading or long term
Many methods differ based on whether you trade for profit or hold long term. Choose a trusted method and be consistent.
Valuation
Value on your Zakat date
Most practical calculations are based on what you own on your Zakat date, using market values or a zakatable portion approach.
Dividends
Count what you still own
Dividends you still own on your Zakat date are commonly included as cash. Reinvested dividends are part of holdings.
Methods
Common ways people calculate Zakat on investments
Investments can be calculated in more than one way. The best practice is to follow a trusted scholarly approach and keep it consistent every year.
Approach 1
Trading style
If you buy and sell frequently with the intention of profit, many people treat the holdings similar to trade wealth. A common practical method is calculating on market value on the Zakat date.
Approach 2
Long term holdings
If you hold primarily for long term growth, some people calculate on the zakatable portion of the company or fund, or they calculate on dividends and cash portions. This can be more accurate but requires data.
Practical recommendation
If you want maximum simplicity, many people use the market value method on their Zakat date for eligible holdings. If you want more precision, you can use a zakatable portion method when reliable data is available.
Action
Step by step: calculate investments in a clean way
These steps keep the process simple without missing categories.
- 1
List your holdings
Write down stocks, ETFs, mutual funds, and any investment accounts you own. Separate trading style holdings from long term holdings if you use different methods.
- 2
Decide your method
Choose market value based calculation or zakatable portion based calculation using trusted guidance and apply it consistently.
- 3
Value on your Zakat date
Use market values for the Zakat date. For funds, use the current NAV. Add any cash balances in brokerage accounts.
- 4
Include dividends you still own
Dividends that remain in your account on your Zakat date are commonly part of cash and included with your total.
- 5
Combine with other assets and calculate once
Add cash and savings, gold, and other zakatable categories. Subtract eligible liabilities if your method allows, then calculate Zakat once on the final total.
Examples
Practical examples for investments
These examples show common simplified approaches. For precision approaches, follow your trusted guidance.
Example 1
| Portfolio market value | 12,000 |
| Brokerage cash balance | 800 |
| Total investments | 12,800 |
Many people include market value plus brokerage cash. Then they combine with other zakatable assets and calculate once.
Example 2
| Long term fund value | 20,000 |
| Dividends held as cash | 500 |
| Total counted (simplified) | 20,500 |
Some use a simplified market value method. Others calculate only the zakatable portion. Choose one method based on trusted guidance.
Evidence
Qur’an & Sahih Hadith references
Zakat applies to wealth. These references establish the obligation, warn against withholding, and emphasize purification and responsibility.
Qur’an
Command to establish prayer and give Zakat
Qur’an 2:43
Pairs salah and Zakat as core obligations, showing Zakat is foundational.
Qur’an
Zakat purifies wealth
Qur’an 9:103
Shows purification and spiritual benefit tied to giving.
Qur’an
Zakat recipients
Qur’an 9:60
Defines who Zakat can be given to, guiding proper distribution.
Qur’an
Warning regarding hoarding wealth
Qur’an 9:34 to 9:35
Warns against hoarding gold and silver and failing to spend in the way of Allah, showing accountability attached to wealth.
Hadith
Islam built upon five pillars (includes Zakat)
Sahih al-Bukhari 8
Places Zakat among the pillars, showing it must be fulfilled as a core obligation.
Hadith
Five pillars narration (includes Zakat)
Sahih Muslim 16
Corroborates the pillars narration in Sahih Muslim, strengthening foundational evidence.
Hadith
Warning against withholding Zakat
Sahih Muslim 987a
A strong warning regarding withholding Zakat on wealth, showing seriousness and accountability.
Hadith
Obligation to give Zakat
Sahih al-Bukhari 1395
Authentic narration related to obligations of Islam, supporting the seriousness of Zakat.
Note: Zakat treatment of investments can differ by scholarly opinion depending on structure and intention. Choose a trusted approach and keep it consistent for accurate yearly calculation.
FAQ
Common investment questions
Clear answers to common questions about stocks, ETFs, funds, dividends, and retirement accounts.
Do I pay Zakat on stocks and shares?▾
Many people do pay Zakat on stocks and shares, but the calculation can differ based on whether you hold investments for trading or long-term ownership. A common practical approach is to calculate on the market value or on the zakatable portion depending on your method.
Do I pay Zakat on dividends?▾
Dividends that you still own on your Zakat date are commonly included as part of your cash and savings. If dividends are automatically reinvested, they are usually part of your investment holdings and treated within your chosen method.
Do I pay Zakat on retirement accounts?▾
Retirement accounts can be complex because access restrictions and tax penalties may apply. Many people follow a trusted scholar's guidance and use a consistent method that reflects what they truly own and can access.
What is the simplest way to calculate Zakat on investments?▾
On your Zakat date, list your investments, decide your method (trading vs long-term approach), calculate the zakatable value, add cash balances, subtract eligible liabilities if applicable, then calculate Zakat once on the total.
If my investments went down, do I still pay?▾
Zakat is based on what you own on your Zakat date. If value decreased, your zakatable value may be lower. The key is accurate valuation and consistent timing.
Next steps
Complete your Zakat calculation
Add your investments to cash and savings, gold, and other asset categories that apply to you, then calculate once on your Zakat date for a complete result.
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.