Zakat on Unsold Inventory
The question of Zakat on unsold inventory creates confusion for many Muslim business owners who maintain significant stock that has not yet been sold to customers. Do you owe Zakat on merchandise sitting in your warehouse waiting for buyers? What about slow moving unsold inventory that has been on shelves for months or even years? How do you value unsold inventory when market conditions have changed since you purchased it? Does the duration you have held unsold inventory affect the Zakat calculation? What happens with dead stock or obsolete unsold inventory that may never sell? Understanding the Islamic ruling on Zakat on unsold inventory is essential for every Muslim trader, retailer, wholesaler, manufacturer, or business owner who maintains inventory for resale purposes.
The clear and unambiguous Islamic position is that unsold inventory is absolutely subject to Zakat when you own it with the intention to sell for profit and your total wealth exceeds nisab for one lunar year. The fact that you have not yet sold the inventory is completely irrelevant to the Zakat obligation. Unsold inventory represents wealth in the form of trading goods that you possess, and Islamic law requires annual purification of all such wealth through Zakat payment at 2.5%. This comprehensive guide explains everything about Zakat on unsold inventory including the foundational Islamic principles, proper valuation methods for unsold stock, treatment of aged and slow moving unsold inventory, dead stock considerations, practical counting and calculation procedures, authentic Quranic and Hadith evidence, and detailed examples showing exactly how Muslim business owners should handle Zakat on unsold inventory in various business situations.
Critical misconception: Unsold inventory is absolutely zakatable even before you sell it
Many Muslim business owners mistakenly believe that because inventory remains unsold, they do not owe Zakat on it until they make sales and convert it to cash. This is completely wrong and leads to massive underpayment of Zakat obligations. The Islamic ruling on Zakat on unsold inventory is crystal clear: if you own trading goods with the intention to sell them for profit, those goods are zakatable from the moment you acquire them, regardless of whether you have found buyers yet. Waiting for sales before paying Zakat on unsold inventory violates the fundamental principles of Islamic commercial law.
If you have been excluding unsold inventory from your Zakat calculations or only paying Zakat on sold goods and cash, you have been seriously underpaying your Islamic obligations. Read this complete guide to understand the correct method for Zakat on unsold inventory according to unanimous scholarly consensus across all four schools of Islamic jurisprudence.
Foundation
Islamic ruling on Zakat on unsold inventory explained clearly
Why unsold inventory is zakatable and the jurisprudential basis for this obligation.
Unsold inventory is trading stock subject to annual Zakat
To understand Zakat on unsold inventory, you must first grasp the Islamic concept of trading stock or merchandise held for sale. In Islamic jurisprudence, any goods you acquire with the intention to resell for profit are classified as trading stock (uruḍ al-tijārah), regardless of what those goods are or whether you have sold them. When you purchase inventory for your business intending to sell it to customers, that unsold inventory becomes trading stock from the moment of acquisition. The unsold status is irrelevant to the fundamental classification. What matters is ownership combined with trading intention, not whether sales transactions have occurred.
Islamic law requires annual Zakat on all trading stock at 2.5% when your total wealth exceeds nisab for one complete lunar year. This obligation applies equally to sold and unsold inventory because both represent wealth in your possession. When you sell inventory, you exchange goods for cash. The cash then appears in your bank account on your Zakat date and you pay Zakat on it as cash. When inventory remains unsold, the goods themselves still sit in your possession as a form of wealth. On your Zakat date, you must value this unsold inventory at current market prices and pay Zakat on it as trading stock. The Zakat obligation does not depend on completing sales but on possessing zakatable wealth, which unsold inventory definitively represents.
Example showing how unsold inventory creates Zakat obligation
You operate a clothing retail business. On January 1st, you purchase £50,000 worth of clothing inventory intending to sell it throughout the year. By your Zakat date on 1st Ramadan, you have sold £35,000 worth of this inventory, generating £52,500 in sales revenue (50% markup). The remaining £15,000 in original cost inventory sits unsold in your store and warehouse. For Zakat on unsold inventory calculation, you include this £15,000 of unsold stock valued at current market prices. You do not exclude it simply because customers have not yet purchased it. The £52,500 cash from sold inventory appears in your bank account and is included as cash. Together, the cash from sold inventory plus the unsold inventory value plus any other wealth forms your total zakatable wealth subject to 2.5% Zakat.
Why sales completion is irrelevant to Zakat on unsold inventory
Some business owners incorrectly think that because inventory generates profit only when sold, Zakat should apply only after sales occur. This reasoning fundamentally misunderstands Islamic Zakat principles. Zakat is not a tax on business profits or sales transactions. Zakat is an annual wealth purification obligation on all zakatable wealth you possess. Unsold inventory in your warehouse is wealth you possess. It has economic value. You could sell it if you chose to. You invested capital to acquire it. It represents stored commercial value waiting for the right buyer or market conditions. All of these characteristics make unsold inventory zakatable wealth.
The Islamic wisdom behind Zakat on unsold inventory is profound. If wealthy merchants could avoid Zakat simply by holding large amounts of unsold inventory and claiming they have not generated profit yet, the Zakat system would fail to redistribute wealth effectively. A merchant sitting on £1 million in unsold inventory represents significant accumulated wealth that should contribute to supporting the poor and needy through Zakat. Waiting for sales would allow indefinite deferral of Zakat obligations, which contradicts the purpose of annual wealth purification. Therefore, Islamic scholars unanimously agree that unsold inventory is zakatable based on ownership and intention, not based on whether sales have been completed. Learn more about trading stock principles in our Stock in Trade guide.
Include unsold inventory in Zakat
All unsold inventory held for resale is zakatable annually
Value unsold inventory at current market prices and include in your complete Zakat calculation.
Calculate Your Zakat →Valuation
How to properly value unsold inventory for Zakat calculation
Current market value versus original cost and the correct approach for different types of unsold inventory.
Use current market value for all unsold inventory
The majority scholarly position across all madhabs requires valuing unsold inventory at current market value on your Zakat date, not at historical purchase cost. This principle is crucial for Zakat on unsold inventory because market conditions change over time. Current market value means the realistic price at which you could sell your unsold inventory in current market conditions through your normal commercial channels. If you operate a wholesale business, current market value is what you could sell the unsold inventory for at wholesale prices today. If you run a retail business, scholars differ on using retail or wholesale value, with the more cautious position being wholesale or quick sale prices.
The reason for using current market value in Zakat on unsold inventory calculation is accuracy and fairness. Suppose you purchased electronics inventory two years ago for £20,000, but those electronics are now outdated and current market value is only £8,000. Calculating Zakat on the £20,000 historical cost would overstate your actual wealth. Conversely, if you purchased raw materials for £15,000 and current commodity prices have increased so the same materials are worth £25,000 today, using historical cost would understate your wealth. Market value on your Zakat date captures the true economic worth of unsold inventory you possess, ensuring your 2.5% Zakat payment represents an accurate proportion of actual current wealth.
Unsold inventory that has appreciated in value
You purchased 1,000 units of a product for £10 each (£10,000 total cost) intending to resell at £15 each. The inventory remains unsold when your Zakat date arrives. However, supplier prices have increased and current wholesale replacement cost is now £13 per unit. For Zakat on unsold inventory, you value at current market value of £13,000, not original cost of £10,000. Even though the inventory is unsold, its current economic worth is £13,000, making that the correct Zakat valuation base. This ensures you pay Zakat on actual current wealth.
Unsold inventory that has depreciated in value
You purchased fashion inventory for £30,000 at the start of the season intending to sell throughout the year. Most items sold, but £8,000 worth (at original cost) remains unsold. These items are now out of season and out of style. Current market value is only £3,500 at clearance prices. For Zakat on unsold inventory, you value at the realistic £3,500 current market value, not the £8,000 you originally paid. This prevents overstating your actual wealth and ensures Zakat calculation reflects economic reality of the unsold inventory you actually possess.
Practical methods for valuing large amounts of unsold inventory
Business owners with extensive unsold inventory face practical challenges in annual valuation. A retailer with 5,000 different SKUs cannot manually research current market value for each item every year. Islamic scholars recognize this difficulty and permit reasonable estimation methods that approximate market value without requiring impractical precision for Zakat on unsold inventory calculation. One approach is using your accounting system to generate inventory reports, then applying current prices from your suppliers for items you still regularly stock. For slow moving or discontinued items, use the lower of cost or estimated current market value, which is conservative.
Another practical method for Zakat on unsold inventory is categorizing inventory into groups with similar characteristics and applying average current market values per category. A hardware store might value all hammers at average current wholesale hammer price, all nails at average wholesale nail price, and so on. This category approach provides reasonable accuracy without individual item valuation. The key principle is honest good faith effort to approximate current market value. Scholars do not demand perfection but do require sincerity and reasonable diligence. Deliberately undervaluing unsold inventory to minimize Zakat is prohibited and spiritually harmful. Learn more about inventory valuation in our Business Inventory guide.
Special cases
Zakat on slow moving unsold inventory and dead stock
How to handle unsold inventory that has been sitting for extended periods and obsolete stock.
Age of unsold inventory does not eliminate Zakat obligation
A common question about Zakat on unsold inventory involves goods that have been sitting for months or years without selling. Does the duration you have held unsold inventory affect whether Zakat is due? The unambiguous answer is no. Unsold inventory that you acquired last week and unsold inventory you have held for three years are treated identically for Zakat purposes. Both represent trading stock you own with intention to sell. Both must be valued at current market prices on your Zakat date. Both are included in Zakat on unsold inventory calculation at the current value. The age or duration of holding is completely irrelevant to the Zakat obligation itself.
However, the age of unsold inventory often affects its current market value, which is relevant to Zakat calculation. Slow moving unsold inventory that has sat for two years may have depreciated significantly. Fashion items lose value as styles change. Technology becomes obsolete. Perishable goods deteriorate. When calculating Zakat on slow moving unsold inventory, you must honestly assess current market value considering the age and condition. If old unsold inventory is only worth 30% of what you paid, value it at that 30% for Zakat. But you cannot exclude slow moving unsold inventory entirely simply because it has been unsold for a long time. As long as it retains any commercial value and you still intend to sell it, it is zakatable.
Slow moving unsold inventory that still has value
You purchased 500 units of a specialty product three years ago for £50 per unit (£25,000 total). You have sold only 150 units over three years, leaving 350 units unsold. The product is still usable and sellable but demand is much lower than anticipated. Current market conditions suggest you could sell the remaining unsold inventory for £35 per unit wholesale, or £12,250 total. For Zakat on unsold inventory, you include £12,250 based on current realistic market value. The fact that inventory has been unsold for three years does not eliminate the Zakat obligation. You pay Zakat on unsold inventory annually at its current value as long as you hold it, even if the same physical items get valued for Zakat multiple years in a row.
Treatment of dead stock and completely obsolete unsold inventory
Dead stock refers to unsold inventory that has lost essentially all commercial value and is unlikely to ever be sold. Truly obsolete products, completely outdated technology, severely damaged goods, expired perishables, or items for which there is absolutely no market demand may qualify as dead stock. The scholarly position on Zakat on dead stock unsold inventory is that if something has genuinely lost all value and cannot be sold at any price, it may be excluded from Zakat calculation. However, business owners must be extremely honest in this assessment and cannot manipulate the definition to avoid Zakat.
The reality is that very little business inventory is truly worthless. Even obsolete or damaged goods often have some residual salvage value. They might be sold at deep discount, to liquidators, for parts, or to bulk buyers. For Zakat on unsold inventory that is slow moving or undesirable, the more cautious and recommended approach is to value it at whatever realistic price you could get, even if very low, rather than claiming it is completely worthless. If you could realistically sell dead stock for £500 even though you paid £5,000, include the £500 in Zakat calculation. This ensures you fulfill obligations completely. Only exclude unsold inventory from Zakat if you would literally have to pay someone to remove it or if it has absolutely zero economic value in any market. When in doubt, include the unsold inventory at some nominal value to be safe.
Multiple years of Zakat on the same unsold inventory
If you hold the same unsold inventory across multiple Zakat dates, you pay Zakat on it every year until you sell it or dispose of it. This is not unfair double taxation but recognition that you continue to possess zakatable trading wealth year after year. Consider a property developer who purchases land for £200,000 intending to develop and sell houses. Development takes five years. During those five years, the developer pays Zakat annually on the land value (which may increase or decrease) because the land is unsold inventory held for trading. Over five years, the developer might pay Zakat five times on the same piece of land at different valuations each year.
This repeated Zakat on unsold inventory reflects Islamic principles beautifully. The developer possesses significant wealth in the form of land for five consecutive years. Each year, that wealth exceeds nisab and should contribute to supporting the poor through Zakat. Once the developer finally sells the land, it converts to cash, and future Zakat is paid on the cash instead of the land. There is no double counting because you only pay Zakat once per year on whatever form your wealth takes that year. The same principle applies to any slow moving unsold inventory. As long as you possess it year after year, you value it annually at current market prices and include it in Zakat on unsold inventory calculation.
All unsold inventory is zakatable
Include slow moving and aged unsold inventory at current value
Calculate complete Zakat on all unsold inventory regardless of how long you've held it.
Calculate Unsold Inventory Zakat →Practical method
How to count and calculate Zakat on unsold inventory
Step by step process for conducting inventory counts and calculating accurate Zakat.
Physical inventory count on your Zakat date
The most accurate method for Zakat on unsold inventory begins with a physical count of all goods you possess on your Zakat date. Count every item in your warehouse, retail showroom, storage facilities, or any location where you hold unsold inventory. For businesses with inventory management systems, generate a complete inventory report as of your Zakat date showing all items on hand. However, even with sophisticated software, conducting physical spot checks or cycle counts helps verify accuracy. The goal is to know exactly what unsold inventory you physically possess on your Zakat date so you can value it correctly.
For large businesses with thousands or tens of thousands of SKUs, a complete individual item count may be impractical. In such cases, use your inventory management system as the primary source, but implement procedures to ensure accuracy. Conduct annual physical counts for high value items. Use statistical sampling for low value items. Investigate and resolve significant discrepancies between system records and physical counts. The Islamic requirement is not perfection but honest good faith effort to accurately account for unsold inventory. Deliberately excluding categories of unsold inventory to avoid Zakat is prohibited, but reasonable estimation methods when exact counting is truly impractical are acceptable.
Step by step Zakat on unsold inventory calculation
Step 1: Conduct physical count or generate system inventory report as of your Zakat date. Step 2: For each category of unsold inventory, determine current market value per unit using recent supplier prices, market rates, or reasonable estimation. Step 3: Multiply quantity by current market value to get total value per category. Step 4: Sum all categories to get complete unsold inventory value. Step 5: Add unsold inventory value to cash, bank balances, sold inventory proceeds, investments, and all other zakatable wealth. Step 6: Compare total to nisab threshold. Step 7: If above nisab and continuously above nisab for one lunar year, calculate 2.5% Zakat on the total. Step 8: Pay Zakat promptly to eligible recipients.
Handling unsold inventory in different physical locations
Muslim business owners often hold unsold inventory in multiple locations: main warehouse, retail stores, offsite storage facilities, distribution centers, or goods in transit between locations. For Zakat on unsold inventory, you must include all unsold inventory you legally own regardless of physical location on your Zakat date. If you own unsold inventory sitting in a third party warehouse, include it. If you have unsold inventory in transit that you legally own (ownership has transferred to you but goods are still shipping), include it. If you operate multiple retail locations, count unsold inventory in all locations and combine for total calculation.
The determining factor is legal ownership on your Zakat date, not physical location. Conversely, if you have sold inventory to a customer but the goods are still physically in your warehouse awaiting pickup, and legal ownership has transferred to the customer, that is no longer your unsold inventory. It is sold inventory that generated cash or receivables you include in Zakat instead. For consignment arrangements, if you have sent goods to consignees but still legally own the unsold inventory, include it in Zakat at current value. If consignees legally own the goods even though you physically hold them in your warehouse, exclude them as they are not your unsold inventory. Legal ownership determines Zakat on unsold inventory inclusion, with physical location being irrelevant.
Work in progress and partially completed unsold inventory
Manufacturing businesses often have work in progress inventory: partially completed goods that will eventually be finished products for sale. How should manufacturers handle Zakat on work in progress unsold inventory? The scholarly position is that work in progress should be included in Zakat at current value, which is typically the cost you have invested so far in raw materials and labor. If you are manufacturing furniture and have 100 chairs at 60% completion, value them at the raw materials cost plus labor costs incurred to date. Do not value at anticipated selling price since they are not yet complete. The principle is including all wealth invested in trading goods, whether raw materials, work in progress, or finished unsold inventory.
For businesses that manufacture to order (customers place orders before you manufacture), work in progress on specific customer orders that are already sold is not unsold inventory. If a customer ordered custom machinery and paid a deposit, and you are 70% through manufacturing their specific order, that work in progress is effectively sold goods generating receivables, not unsold inventory. However, work in progress manufactured speculatively without specific customer orders in anticipation of future sales is definitely unsold inventory subject to Zakat. Manufacturing businesses must carefully distinguish between production for specific sold orders versus production of unsold inventory stock on speculation. Only the latter is included in Zakat on unsold inventory calculation. Learn more in our comprehensive inventory guide.
Count all unsold inventory accurately
Physical counts ensure complete Zakat on unsold inventory
Include unsold inventory from all locations and all forms in your Zakat calculation.
Calculate Complete Zakat →Real scenarios
Detailed examples of Zakat on unsold inventory calculation
Step by step walkthroughs showing how different businesses calculate Zakat on unsold inventory.
Electronics retailer with mixed age unsold inventory
Background: Fatima operates an electronics retail store. Her Zakat date is 1st Muharram. She maintains significant unsold inventory with varying ages and current market values.
Unsold inventory breakdown: Recent smartphones purchased 2 months ago: 45 units, cost £300 each (£13,500), current market value £295 each = £13,275. Laptops purchased 6 months ago: 22 units, cost £600 each (£13,200), current market value £550 each = £12,100. Tablets purchased 18 months ago: 35 units, cost £250 each (£8,750), current market value £180 each (outdated models) = £6,300. Accessories and cables of various ages: bulk valuation at current wholesale prices = £4,200. Total unsold inventory at current market value: £35,875.
Complete Zakat calculation: Unsold inventory: £35,875. Cash from recent sales in registers: £2,400. Business bank account: £18,600. Personal savings: £12,300. Total wealth: £69,175. Nisab: £420. Zakat due: £1,729.38.
Key insight: Fatima includes all unsold inventory regardless of age at realistic current market values, not original costs. The 18 month old tablets are worth significantly less than she paid, but they still have value and must be included in Zakat on unsold inventory. The recent phones are valued slightly below cost reflecting minor market changes. This accurate market value approach ensures her Zakat reflects real current wealth.
Clothing wholesaler with seasonal unsold inventory
Background: Ahmed operates a wholesale clothing business selling to retailers. His Zakat date falls just after winter season on 15th Shaban. He has substantial winter clothing unsold inventory that is now out of season.
Unsold inventory situation: Winter jackets: 420 units purchased for £45 each (£18,900 cost). Season ended, current quick sale value £22 each = £9,240. Winter accessories: bulk purchase cost £8,500, current clearance value £3,200. New spring collection just arrived: 650 units at cost £38 each (£24,700), current wholesale value £40 each = £26,000. Year round basics: stable value at current wholesale = £15,400. Total unsold inventory current value: £53,840.
Zakat calculation: Unsold inventory: £53,840. Accounts receivable from retailers: £22,300. Business cash: £8,900. Personal accounts: £19,400. Total: £104,440. Zakat: £2,611.
Key insight: Ahmed's Zakat on unsold inventory calculation shows dramatic seasonal value fluctuations. Out of season winter stock is valued at realistic clearance prices, significantly below cost, while new spring inventory is valued at current wholesale. He does not exclude old unsold inventory just because it is out of season; he values it honestly at what he could actually sell it for today. This seasonal reality is captured through honest market value assessment.
Auto parts business with slow moving unsold inventory
Background: Yusuf runs an auto parts wholesale business. His Zakat date is 1st Ramadan. He has a mix of fast moving and slow moving unsold inventory, including some parts that have been unsold for years.
Unsold inventory categories: Fast moving parts (brakes, filters, oils): turn over quickly, valued at current wholesale prices = £48,500. Moderate moving parts (starters, alternators): some aged inventory, valued at current market = £31,200. Slow moving specialized parts: purchased 1-4 years ago for £22,000, current market value estimated £12,500 (many obsolete for newer car models). Very slow dead stock: purchased £8,000, realistic liquidation value £1,500. Total unsold inventory: £93,700.
Complete calculation: Unsold inventory: £93,700. Business checking: £14,300. Receivables: £18,900. Personal savings: £28,600. Total: £155,500. Zakat: £3,887.50.
Key insight: Yusuf includes all unsold inventory in Zakat calculation but uses realistic current values. The very slow dead stock is valued at liquidation price, not excluded completely. Slow moving parts held for years are valued at conservative current estimates. This demonstrates how to handle difficult valuation situations for Zakat on unsold inventory: include everything at honest assessment of current worth, erring on side of inclusion rather than exclusion when uncertain.
Furniture manufacturer with work in progress unsold inventory
Background: Aisha manufactures custom furniture. Her Zakat date is 10th Dhul Hijjah. She has finished unsold inventory, work in progress for stock, and work in progress for specific customer orders.
Inventory breakdown: Finished furniture awaiting sale: 45 pieces valued at current wholesale price = £38,400. Work in progress manufactured for stock (no specific customer): raw materials and labor invested = £14,600. Work in progress for specific sold customer orders: £9,200 (this is not unsold inventory, it is sold goods generating receivables). Raw materials held for future manufacturing: £18,700. Total unsold inventory: £71,700 (finished + WIP for stock + raw materials, excluding sold order WIP).
Zakat calculation: Unsold inventory: £71,700. Cash from deposits on sold orders: £12,400. Business bank: £9,800. Personal savings: £16,500. Total: £110,400. Zakat: £2,760.
Key insight: Aisha correctly includes all unsold inventory (finished and work in progress manufactured speculatively) plus raw materials in Zakat calculation, but excludes work in progress for specific sold customer orders since those are effectively sold goods. This shows proper distinction between unsold inventory and sold goods in manufacturing contexts. All forms of wealth invested in creating unsold inventory for eventual sale must be included in Zakat on unsold inventory.
Islamic evidence
Quran and Sahih Hadith establishing Zakat on unsold inventory
Authentic textual sources proving the obligation of Zakat on all trading goods including unsold inventory.
Quran
Give Zakat from what you possess
Quran 2:267
Allah commands giving from what you possess and earned. Unsold inventory is wealth you possess in the form of trading goods, making it subject to Zakat regardless of whether you have sold it to customers.
Quran
Establish prayer and give Zakat
Quran 2:43
Prayer and Zakat are paired as fundamental obligations. Zakat on unsold inventory is part of fulfilling this command for business owners possessing trading stock.
Quran
Take charity to purify wealth
Quran 9:103
Zakat purifies wealth. Unsold inventory represents accumulated business wealth that requires annual purification through Zakat payment whether sold or unsold.
Quran
Rights of the needy in your wealth
Quran 70:24-25
The poor have a defined right in the wealth of believers. Unsold inventory sitting in warehouses is wealth containing this right that must be fulfilled through Zakat.
Hadith
Zakat on trading goods commanded
Abu Dawud 1562
The Prophet (peace be upon him) commanded Zakat from articles of trade. Unsold inventory qualifies as trading articles requiring annual Zakat, establishing clear obligation on all trading stock regardless of sales status.
Hadith
Value goods when Zakat is due
Abu Dawud 1573
Trading goods should be valued when Zakat becomes due. This hadith supports valuing unsold inventory at current market worth on Zakat date for accurate calculation.
Hadith
Zakat purifies business wealth
Sahih Muslim 987
Zakat purifies wealth and increases blessings. Muslim business owners must purify unsold inventory through annual Zakat to maintain blessed halal commerce.
Hadith
Warning against withholding Zakat
Sahih al-Bukhari 1403
Severe consequences warned for possessing zakatable wealth without paying Zakat. This applies equally to unsold inventory and all other zakatable wealth forms.
Unanimous scholarly consensus on unsold inventory being zakatable
All four schools of Islamic jurisprudence unanimously agree that trading stock held for resale is zakatable annually at 2.5% regardless of whether sales have occurred. The Hanafi, Maliki, Shafi, and Hanbali madhabs all recognize that ownership combined with trading intention creates Zakat obligation, with sales completion being irrelevant. Classical scholars across all schools explicitly addressed unsold inventory in their writings, confirming that merchants and traders must pay Zakat on all goods held for trade whether sold or unsold. No legitimate scholarly opinion permits excluding unsold inventory from Zakat calculation. This fourteen century consensus establishes beyond any doubt that Zakat on unsold inventory is an absolute obligation for every Muslim business owner who maintains trading stock, regardless of sales velocity, inventory age, or market conditions. Understanding and fulfilling this obligation is essential for purifying business wealth and ensuring commercial activities remain in accordance with divine law.
FAQ
Frequently asked questions about Zakat on unsold inventory
Direct answers to common questions Muslim business owners have about unsold inventory Zakat.
Do I pay Zakat on unsold inventory that I haven't sold yet?▾
Yes, absolutely. Zakat on unsold inventory is obligatory when you own the goods with intention to sell them for profit, regardless of whether you have made any sales. Unsold inventory sitting in your warehouse, showroom, or storage is still trading stock subject to annual Zakat at 2.5%. The obligation to pay Zakat on unsold inventory is not dependent on completing sales but on ownership and intention. If your total wealth including unsold inventory exceeds nisab for one lunar year, you must calculate and pay Zakat on all unsold inventory at current market value.
Does it matter how long I've held unsold inventory for Zakat purposes?▾
No, the duration you have held unsold inventory does not change the Zakat obligation. Whether you acquired inventory last week or three years ago, if it remains unsold and you still intend to sell it for profit, it is zakatable. Slow moving unsold inventory that has been sitting for months or years is treated exactly the same as fast moving stock for Zakat calculation. The only timing requirement is that your total wealth must exceed nisab for one complete lunar year. The age of specific unsold inventory items is irrelevant to Zakat on unsold inventory calculation.
How do I value unsold inventory for Zakat calculation?▾
Value unsold inventory at current market value on your Zakat date, not at the original purchase price you paid. Current market value means the realistic price you could sell the unsold inventory for in current market conditions. For wholesale businesses, use current wholesale prices. For retail businesses, the majority position is to use wholesale or quick sale value rather than full retail price. If you purchased unsold inventory for £10,000 but current market conditions mean you could only sell it for £7,000, value it at £7,000. Market value ensures accurate Zakat on unsold inventory.
What about dead stock or obsolete unsold inventory that may never sell?▾
Dead stock and obsolete unsold inventory that has lost all commercial value may be excluded from Zakat calculation if it is truly worthless. However, you must be honest in this assessment. If dead stock still has some residual value, even at deep discount, include it at that realistic salvage value in Zakat on unsold inventory calculation. Many scholars recommend including all unsold inventory at some nominal value rather than claiming it is completely worthless, as this is more cautious and ensures complete fulfillment of Zakat obligations.
Is Zakat on unsold inventory calculated differently than sold inventory?▾
No, there is no difference in how you calculate Zakat on unsold inventory versus inventory you have already sold during the year. Both are trading stock. The key distinction is that sold inventory has converted to cash which appears in your bank account on Zakat date, while unsold inventory must be physically counted and valued. You do not pay Zakat twice on the same items. Sold inventory generates cash which you include in Zakat as cash. Unsold inventory you still hold gets included at current market value. Together they represent your complete trading wealth subject to Zakat.
Do I pay Zakat on unsold inventory every year even if it's the same stock?▾
Yes, if you hold unsold inventory across multiple Zakat dates, you pay Zakat on it annually as long as you still own it and your total wealth exceeds nisab. If you have slow moving unsold inventory that sits for three years, you value and pay Zakat on it three times, once each annual Zakat date. This is not double taxation but recognition that you continue to possess zakatable trading wealth. Once you eventually sell the unsold inventory, it converts to cash which is then included in future Zakat calculations as cash instead of inventory.
Should I do a physical count of all unsold inventory for Zakat?▾
Yes, conducting a physical count of unsold inventory is the most accurate method for Zakat calculation. Count all unsold inventory on hand at your Zakat date, whether in warehouse, showroom, storage facilities, or in transit that you legally own. For large businesses with thousands of SKUs, you can use inventory management systems to assist, but physical spot checks help verify accuracy. The goal is to know exactly what unsold inventory you possess on your Zakat date so you can value it correctly and include the complete amount in Zakat calculation.
What if my unsold inventory value fluctuates significantly during the year?▾
Use the actual unsold inventory value on your specific annual Zakat date, regardless of fluctuations at other times. If you have high unsold inventory in some months and low in others due to seasonal patterns or purchasing cycles, only the amount physically present on your Zakat date matters for that year's Zakat calculation. Do not average unless absolutely necessary. The snapshot approach on your Zakat date is the standard method for Zakat on unsold inventory, maintaining consistency with all other Zakat calculations.
Does unsold inventory on consignment or held by distributors count for Zakat?▾
If you still legally own unsold inventory even though it is physically located with consignees or distributors, include it in Zakat calculation at current value. Unsold inventory on consignment remains your property until sold, making it subject to Zakat on unsold inventory. However, if you have sold inventory to distributors and they now own it (even if they haven't sold to end customers), it is no longer your unsold inventory and you do not include it. The determining factor is legal ownership, not physical location or whether end sale has occurred.
Can I deduct the cost of storing unsold inventory when calculating Zakat?▾
No, you cannot deduct storage costs, warehousing fees, or other expenses from unsold inventory value for Zakat purposes. Zakat on unsold inventory is calculated on the market value of the goods themselves, not net of expenses. If you have £50,000 in unsold inventory and spent £5,000 on warehouse rent to store it, you still calculate Zakat on the full £50,000 inventory value. Operating expenses do not reduce the zakatable value of unsold inventory, though some scholars permit deducting immediate debts from total wealth before calculating Zakat.
Implementation
Practical tips for calculating Zakat on unsold inventory
Make your annual unsold inventory Zakat calculation accurate and manageable.
1. Schedule inventory count near Zakat date
Plan your physical inventory count or system inventory report generation within one week of your annual Zakat date. This ensures valuation reflects actual unsold inventory you possess on your Zakat date. Set reminders one month in advance to prepare for the counting process and arrange necessary resources and staff time.
2. Research current market values honestly
Do not use outdated prices or wishful thinking. Research actual current wholesale or market prices for your unsold inventory on your Zakat date. Check recent supplier invoices, industry price lists, commodity markets, or recent transactions. For slow moving or aged unsold inventory, honestly assess realistic current value considering market conditions.
3. Include all unsold inventory categories
Do not exclude categories hoping to minimize Zakat. Include finished goods unsold inventory, work in progress for stock, raw materials, slow moving items, seasonal inventory, all ages of unsold inventory, and goods in all physical locations you legally own. Complete inclusion ensures full Zakat obligation is met.
4. Value conservatively when uncertain
When uncertain about precise current market value for unsold inventory, err on the side of higher rather than lower valuation. Include questionable dead stock at nominal values rather than excluding entirely. Conservative valuation ensures you never underpay Zakat and fulfills the spiritual purpose of purifying wealth.
5. Document your valuation methodology
Keep records of how you valued unsold inventory for Zakat purposes including price sources used, estimation methods for bulk categories, and treatment of slow moving or dead stock. This documentation helps next year's calculation and demonstrates good faith compliance with Zakat obligations.
6. Combine unsold inventory with all other wealth
After valuing unsold inventory, add it to cash, bank balances, receivables, investments, gold, and all other zakatable wealth. Calculate 2.5% Zakat on the combined total if above nisab. Unsold inventory is just one component of your complete wealth subject to Zakat. Our calculator guides you through all categories.
The fundamental principle for unsold inventory
Remember this essential truth: if you own trading goods with the intention to sell them, those goods are zakatable whether you have sold them yet or not. Unsold inventory represents wealth you possess in the form of merchandise. Value it honestly at current market prices on your Zakat date, include it with all other zakatable wealth, and calculate 2.5% Zakat if the total exceeds nisab for one lunar year. This purifies your business wealth, brings divine blessing to your trade, and fulfills your sacred obligation to support those in need. The age of unsold inventory, sales velocity, market conditions, or any other factor does not eliminate the Zakat obligation on goods you hold for trading purposes.
Ready to calculate unsold inventory Zakat
Calculate complete Zakat on all your unsold inventory and trading stock
Use our comprehensive Zakat calculator to include unsold inventory at current market value alongside cash, sold inventory proceeds, receivables, investments, and other zakatable wealth. The calculator guides you through valuing all unsold inventory properly, applying the correct nisab threshold, and calculating accurate 2.5% Zakat on total wealth. Whether you operate retail, wholesale, manufacturing, or any business holding inventory for resale, ensure your Zakat on unsold inventory is calculated correctly according to authentic Islamic scholarship.
Related guides for Muslim business owners
Disclaimer: This guide provides general educational information about Zakat on unsold inventory based on widely accepted Islamic scholarly positions from the four major schools of jurisprudence. Individual business circumstances vary significantly based on the type of business, inventory characteristics, accounting systems, valuation complexity, market volatility, seasonal patterns, slow moving stock issues, dead stock assessment, manufacturing processes, consignment arrangements, multiple location operations, and specific business models. For questions about complex unsold inventory situations including determining whether obsolete inventory is truly worthless, valuing work in progress for custom manufacturing, handling inventory valuation when market prices are extremely volatile, dealing with inventory financing arrangements, managing consignment relationships, calculating Zakat for businesses with perpetual inventory systems versus periodic systems, or any other specialized circumstances, consult qualified Islamic scholars who understand both classical fiqh principles regarding trading stock and contemporary business inventory management practices. This guide is designed to help Muslim business owners understand and fulfill their Zakat obligations on unsold inventory using established Islamic jurisprudence that has governed commercial Zakat for over fourteen centuries, now applied to modern business operations and inventory systems.
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.