Zakat on Long Term Investments
Zakat on long term investments is one of the highest searched topics in modern Zakat calculation because long term investors often hold assets for years without selling. People ask: Is Zakat only when I sell my stocks? Do I pay Zakat on unrealized gains? What if I reinvest dividends automatically? How do I calculate Zakat on ETFs, index funds, mutual funds, and retirement style investment accounts? What about vesting shares, RSUs, employee share plans, and private investments?
This guide answers every practical and in demand question about Zakat on long term investments with clarity, evidence from the Qur’an and authentic hadith, and step by step examples. The key principle is simple: long term investments represent wealth you own. If your total zakatable wealth stays above nisab for one lunar year, Zakat becomes due annually, regardless of whether you sell or hold indefinitely.
The biggest misconception about Zakat on long term investments
Many long term investors assume Zakat only becomes due when they sell and realize profit. That assumption usually comes from mixing Zakat rules with capital gains tax logic. Islamic Zakat does not work like taxation. Zakat is a worship obligation tied to owning wealth that meets nisab and hawl conditions. You can hold an ETF for twenty years and still owe Zakat annually if you remain above nisab.
Another misconception is that long term investing is exempt because it represents future goals like retirement, children’s education, or a house deposit. Intention is spiritually important, but it does not remove Zakat once wealth is owned and accessible. Goals do not cancel Zakat. The poor have a right in qualifying wealth.
Definition
What counts as long term investments for Zakat
If it can grow in value or generate income and you own it, it likely belongs in Zakat on long term investments.
Zakat on long term investments applies to assets you purchase with the intention of holding for years, not flipping quickly. In practical modern finance, long term investments include shares held in a brokerage, ETFs that track indices, mutual funds, index funds, robo advisor portfolios, dividend reinvestment plans, and portfolios structured around long term growth. It also includes private investments where value exists and ownership is established, such as private equity stakes, startup shares you own today, and certain restricted shares once they are truly yours.
Long term does not mean non zakatable. Long term simply describes holding intention. Zakat is based on ownership and wealth status. If your long term investments are accessible and have value on your Zakat date, they are part of your zakatable wealth calculation.
Common long term investment types included in Zakat on long term investments
Stocks held for years including growth stocks, dividend stocks, blue chip holdings, and fractional shares.
ETFs and index funds including broad market, sector ETFs, Shariah screened ETFs, and bond like instruments if owned.
Mutual funds, managed funds, and unit trusts where you own units with a market value.
Dividend reinvestment accounts and DRIP holdings where dividends automatically buy more shares.
Private company shares if you truly own them and they have a realizable value.
Employee stock plans once shares are purchased or vested, not while they are only promised.
If you are unsure whether an asset is zakatable, the simplest approach is to ask: Do I own it? Can it be valued today? Is it part of my net wealth? If yes, it belongs in the annual Zakat calculation workflow alongside cash and savings. For the full asset list, review Zakat on Cash and Savings and Zakat on Investments.
One annual calculation
Calculate Zakat on long term investments in minutes
Add your investment market value on your Zakat date, combine with cash and other assets, then pay 2.5% on the total.
Open Main Calculator →Method
How to calculate Zakat on long term investments step by step
A precise workflow that works for stocks, ETFs, index funds, mutual funds, and diversified portfolios.
Step 1: Choose your annual Zakat date
Zakat on long term investments is not calculated randomly or monthly. You pick one date on the Islamic calendar and calculate your complete Zakat on that date each lunar year. This is tied to hawl. If you are unsure how to set your Zakat date, read When to Pay Zakat.
Step 2: Find the market value of your long term investments on that date
On your Zakat date, open your brokerage, investment app, or statements and record the total market value. Use the value as close to the Zakat date as reasonably possible. If markets are closed, use the last closing value or the nearest available valuation. Zakat is a worship obligation and Allah does not burden you with impossible precision. Consistency matters more than perfect timing down to the hour.
For a long term investor, market value already includes unrealized gains, unrealized losses, and reinvested dividends. That is exactly why market value is the practical basis for Zakat on long term investments.
Step 3: Combine investments with other zakatable assets and subtract valid deductions
Zakat on long term investments is not calculated in isolation. Zakat is due on your total zakatable wealth. Combine investment value with cash and savings, gold if applicable, crypto if you own any, and receivables that are expected. Then subtract valid immediate liabilities according to your chosen scholarly approach. If you want a full debt discussion, read Does Debt Reduce Zakat.
Step 4: Compare to nisab and calculate 2.5%
Once your total is clear, compare it to nisab. If above nisab and hawl is complete, Zakat is due. Zakat rate on zakatable wealth is 2.5%. Use the calculator to avoid mistakes and to ensure you do not miss categories.
The simplest and safest rule for Zakat on long term investments
If your long term investments are accessible and have a market value, include their market value in your annual Zakat calculation. This approach is widely used because it is transparent, easy to verify, and matches the logic of Zakat being due on wealth held over time.
Edge cases
Specific long term investment situations people search about
Precise answers to the most commonly searched edge cases in Zakat on long term investments.
Zakat on long term investments with dividend reinvestment (DRIP)
With DRIP, dividends automatically purchase more shares. Investors ask whether they should separate dividends from principal. You do not need to separate them. On your Zakat date, your holding quantity and market value already reflect reinvested dividends. Zakat on long term investments is then calculated on the total market value. This is one of the cleanest cases because the account value is the final wealth figure.
Zakat on long term investments in growth portfolios with no dividends
Many growth investors hold companies that do not pay dividends. They assume Zakat is only on income. Zakat is on wealth. A growth stock is still wealth. If you own $20,000 worth of shares and you hold for ten years expecting appreciation, you still include the market value annually. No dividends does not remove Zakat.
Zakat on long term investments in mutual funds and index funds
Index funds and mutual funds are just pooled ownership in underlying assets. For Zakat on long term investments, the most practical method is to use the market value of your units on your Zakat date. If your fund provides a statement with unit price and units owned, multiply them. If your app provides a total portfolio value, you can use that figure.
Some investors ask if they must calculate Zakat based on the underlying cash or business assets inside the fund. That approach can be complex and is often impractical for typical investors. The market value approach is commonly used because it captures the wealth you own. If you are using a specialized scholarly method for fund composition, keep it consistent year to year. Otherwise, value based calculation keeps you accurate and simple.
Zakat on long term investments held in employer plans and vesting schedules
People frequently search about RSUs, stock options, and vesting. The core rule is ownership. If the shares have not vested, they are not yours yet, so they are not included. Once they vest and become yours, they are included in Zakat on long term investments if your wealth is above nisab and hawl is complete.
If you receive vested shares but they are restricted from sale for a short period, you still own them. Most people include the value because it is wealth that exists. If there is a genuine lock where you cannot access or transfer the value at all for a long time, consult a scholar, but do not assume exemption without evidence.
Zakat on long term investments with margin, leverage, or borrowed exposure
If you invest using margin or leverage, your account may show a portfolio value while you owe a margin loan. Zakat is on net wealth. That means you consider what you truly own after immediate liabilities. The margin debt question intersects with debt deduction rules. If you want a careful framework, read Does Debt Reduce Zakat and apply a consistent approach.
Also note that interest based margin lending is a separate Shariah issue. The Zakat obligation still exists on wealth, but you should seek guidance to exit impermissible contracts while fulfilling Zakat correctly.
Zakat on long term investments in crypto or tokenized assets
Many long term investors also hold crypto for years. The valuation principle is the same: include market value on your Zakat date. For crypto specific rules like staking rewards and stablecoins, use Zakat on Crypto. When you combine everything, you get one total and pay 2.5%.
Total wealth method
Combine long term investments with your other assets and calculate once
Zakat is simplest when you treat it as one annual wealth snapshot. Add investments, add cash, add other assets, then calculate 2.5% on the total.
Calculate Now →Examples
Detailed examples of Zakat on long term investments
Realistic scenarios that match how people actually invest over multiple years.
Example 1: Long term ETF investor with monthly contributions
Profile: Sara invests $600 monthly into a broad market ETF for long term growth. She never sells and reinvests everything. Her Zakat date is 1 Ramadan.
On her Zakat date: Her ETF account market value is $24,800. Her cash savings total $3,700. She has $1,200 in cash at home for emergencies. Total zakatable wealth snapshot is $29,700.
Nisab and hawl: Sara’s wealth remained above nisab for the full lunar year. Therefore Zakat is due.
Zakat on long term investments calculation: $29,700 × 0.025 = $742.50. Sara pays $743. She does not need to calculate Zakat separately on every monthly contribution. The ETF value on her Zakat date already includes all contributions and growth.
Key lesson: Zakat on long term investments works perfectly with monthly investing because the annual snapshot method captures the entire portfolio value at one point in time.
Example 2: Dividend stock portfolio with dividends paid to cash
Profile: Ahmad holds dividend stocks for years. Dividends are paid as cash and not reinvested. He uses dividends to build a cash buffer.
On his Zakat date: Stocks market value is $52,000. Dividends accumulated as cash in the brokerage are $2,400. Bank savings are $6,600. Total is $61,000.
Zakat on long term investments calculation: $61,000 × 0.025 = $1,525. Zakat is due on both the stock value and the dividend cash because both are wealth he owns.
Key lesson: Dividends do not create a separate Zakat category. They either increase the portfolio value if reinvested or appear as cash if paid out. In both cases, Zakat on long term investments remains an annual wealth calculation.
Example 3: Investor with RSUs that vest mid year
Profile: Maryam receives RSUs at work. Some are unvested and some vested. She also has a long term index fund account.
Ownership check: Unvested RSUs are not included because she does not own them yet. Vested shares are included.
On her Zakat date: Vested shares market value is $9,300. Index fund value is $18,900. Cash savings are $2,000. Total is $30,200.
Zakat on long term investments calculation: $30,200 × 0.025 = $755. Maryam pays $755. Next year, if more RSUs vest, they will be included through the higher total.
Key lesson: Zakat follows ownership. Promised future shares are not wealth. Owned shares are wealth.
Example 4: Long term investor with a large short term bill and debt question
Profile: Yusuf has $40,000 in long term investments and $6,000 in cash. He also owes an immediate credit card bill of $2,500 due this month.
Debt handling: Many people deduct immediate liabilities when calculating net zakatable wealth. Yusuf deducts the $2,500 immediate bill as a short term liability.
Net wealth on Zakat date: $46,000 minus $2,500 = $43,500.
Zakat on long term investments calculation: $43,500 × 0.025 = $1,087.50. Yusuf pays $1,088.
Key lesson: Debt rules can change the final number, but the portfolio itself remains part of Zakat on long term investments. Use the calculator and read Does Debt Reduce Zakat for a consistent method.
Islamic evidence
Qur’an and Sahih Hadith foundations for Zakat on long term investments
Zakat is established on wealth ownership, purification, and the right of the poor in the wealth of believers.
Quran
Command to establish prayer and give Zakat
Quran 2:43
Allah repeatedly commands Zakat as a pillar obligation. Long term investments are modern forms of owned wealth that fall under Zakat when nisab and hawl are met.
Quran
Take charity from their wealth to purify them
Quran 9:103
This verse establishes Zakat as purification of wealth. Investment wealth is part of what Allah has granted and is purified through Zakat.
Quran
Spend from the good things you have earned
Quran 2:267
Allah commands giving from earned wealth. Long term investment portfolios originate from surplus wealth and are included in yearly Zakat once conditions are met.
Quran
In their wealth is a right for the needy
Quran 51:19
This verse affirms that qualifying wealth contains a right for those in need. Long term investments are qualifying wealth when they meet nisab and hawl.
Hadith
Islam is built upon five pillars
Sahih al-Bukhari 8
Zakat is a core pillar, not an optional charity. Its obligation applies to qualifying wealth regardless of whether that wealth is held as cash or long term investments.
Hadith
No Zakat until a year has passed
Sunan Abu Dawud 1573
This establishes the hawl rule. Zakat is yearly on wealth that remains above nisab for a lunar year, which includes long term investments valued on your Zakat date.
Hadith
Warning for withholding Zakat
Sahih Muslim 987a
The Prophet (peace be upon him) warned of severe consequences for those who withhold Zakat from qualifying wealth, emphasizing careful annual calculation and prompt payment.
Hadith
Zakat is taken from the wealthy and given to the poor
Sahih al-Bukhari 1395
This hadith expresses the purpose of Zakat as redistribution. Long term investments are often where modern wealth sits, so they must be included when conditions are met.
Why evidence matters for Zakat on long term investments
The Qur’an and authentic hadith establish that Zakat is tied to wealth ownership and the passing of hawl, not to selling events. That is why long term investing does not remove Zakat. Investment structures change across centuries, but the underlying principle of owned wealth remains consistent. A stock certificate and a gold coin are different instruments, but both can represent owned wealth above nisab for a lunar year.
FAQ
Frequently asked questions about Zakat on long term investments
Direct answers to the most searched questions, written for clarity and action.
Do I pay Zakat on long term investments every year even if I never sell?▾
Yes. Zakat on long term investments is due annually when your total zakatable wealth stays above nisab for one lunar year. Selling is not a condition. Ownership of wealth is the condition.
Is Zakat calculated on the purchase price or today’s value?▾
Zakat is calculated on the current market value on your Zakat date, not on your original purchase price. If the investment increased, Zakat increases. If it decreased, Zakat decreases.
Do I pay Zakat on unrealized gains in long term investments?▾
Yes, because Zakat is based on the present market value of what you own. Market value includes unrealized gains and losses by definition.
Do dividends change how Zakat on long term investments works?▾
Dividends are treated like cash once received. If you keep them, they become part of your cash wealth and are included in annual Zakat. If dividends are automatically reinvested, they increase your holdings and are included through the higher market value.
Do I pay Zakat on ETFs and index funds the same way as stocks?▾
Yes. ETFs, index funds, and mutual funds are investment vehicles. For Zakat purposes, the simplest and widely used method is paying 2.5% of their market value on your Zakat date if your wealth is above nisab and hawl is complete.
What if my long term investment account is in a tax advantaged wrapper?▾
Zakat depends on ownership and accessibility, not tax labeling. If the investments are yours and accessible, they are included. If they are locked and you cannot access them, many scholars consider them not currently zakatable until accessible.
Do I pay Zakat on RSUs or shares that have not vested?▾
Unvested RSUs are generally not included because you do not own them yet. Once they vest and become yours, they enter your zakatable wealth and are included in your annual calculation.
Do I pay Zakat on long term investments held jointly with my spouse?▾
Yes, but the Zakat responsibility is tied to ownership. If you both own the portfolio, each person calculates Zakat on their share unless you agree that one person will pay on behalf of both with clear intention.
Is there Zakat on long term investments that are Shariah non compliant?▾
Zakat is still due on wealth you possess. However, you should also address purification of impermissible income. Zakat does not make haram earnings halal. Consult a qualified scholar for purification details while still fulfilling Zakat obligation.
Can I pay Zakat from cash instead of selling long term investments?▾
Yes. You can pay Zakat from any halal money you own. You do not need to liquidate long term holdings if you have enough cash to pay your Zakat amount.
What if I invest monthly and keep adding to my long term portfolio?▾
You still choose one annual Zakat date and calculate on total market value that day. Monthly contributions simply increase your wealth. Learn hawl rules in the guide on when to pay Zakat.
What if my investment value drops below nisab during the year?▾
If your total zakatable wealth drops below nisab, hawl restarts when you later return above nisab. If you stayed above nisab continuously for the lunar year, Zakat remains due.
Do I deduct brokerage fees or platform fees when calculating Zakat?▾
You typically calculate based on the market value you actually own. If there are unavoidable fees required to liquidate, some people net them out conservatively, but the simplest approach is to use market value and keep the calculation consistent each year.
Do I pay Zakat on long term investments plus cash savings together?▾
Yes. Zakat is calculated on total zakatable wealth. Combine your investments with cash and savings, gold if applicable, and other zakatable assets, then pay 2.5% on the total. Use the main calculator for a complete total.
Checklist
Practical checklist for Zakat on long term investments
A simple workflow you can repeat every year without missing anything.
1. Fix your Zakat date
Choose a single Islamic date for annual calculation. Keep it consistent. Learn hawl in When to Pay Zakat.
2. Record portfolio market value
Use brokerage total value on your Zakat date. Include ETFs, index funds, mutual funds, stocks, and vested shares. Market value is the core for Zakat on long term investments.
3. Add cash, savings, and other zakatable assets
Combine investments with cash accounts, savings, and other assets. Use Zakat on Cash and Savings as a companion guide.
4. Apply your debt approach consistently
If you deduct immediate liabilities, do it consistently each year. For detail, see Does Debt Reduce Zakat.
5. Compare to nisab
Nisab changes with metal prices. Review What is Nisab and use the calculator for updated thresholds.
6. Pay promptly
Once calculated, pay Zakat without delaying. Zakat on long term investments is fulfilled when it reaches eligible recipients.
The simplest yearly rule
On your Zakat date, treat your long term investment portfolio as wealth: use current market value, combine with other zakatable assets, then pay 2.5% if you are above nisab and hawl is complete. This removes confusion and keeps your worship consistent year after year.
Ready to calculate
Calculate Zakat on long term investments correctly
Zakat on long term investments is annual and value based. Do not wait for selling. Do not guess based on purchase price. Use a single annual Zakat date, value your portfolio, combine with your other zakatable assets, and pay 2.5%.
Disclaimer: This guide provides educational information about Zakat on long term investments based on widely accepted Islamic principles, Qur’an verses, and authentic hadith. Individual circumstances vary by account accessibility, vesting rules, private investment liquidity, debt structure, and personal ownership arrangements. For complex cases such as locked retirement accounts, illiquid private equity valuations, startup shares with transfer restrictions, options contracts, and purification of non compliant income, consult qualified scholars familiar with Islamic commercial law and modern investment mechanics.
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.