Arguments on Zakah on Rental Property
Why 10% zakah on rent? Why not 2.5% or 5% for that matter? I think I've heard it before somewhere, but want you to enumerate the exact reasons for this analogy, so that discerning and/or refuting becomes easier for me.
Your question is based on the views of Javed Ahmad Ghamidi. Since you seem to be interested to know the reasons behind this view, I refrain from sharing my own view on the subject of zakah and simply explain the reasoning behind Javed Ahmad Ghamidi's view. I refer to my view at the end of this answer in only one line:
We know based on the Established Sunnah that there are overall four rates for Zakah. These are:
- 2.5%: This is for general wealth
- 20%: This is for a valuable wealth that one gains without using any resources
-10% or 5%: This is for agricultural production where, respectively, the land receives water naturally or it receives it by the work of labour.
It is important to appreciate that while the above is the Shari’ah as it comes from the Established Sunnah and every Muslim scholar agrees with it, the application of the above on other sources of income is a matter of feqhe where individuals may have differences of opinions.
The other point to appreciate is that the economy and business system at our time is fundamentally different from the situation in Arabia 1400 years ago. It is not therefore unexpected to see lack of directives that could be straightforwardly related to the sources of income at our time. This is why we see much disagreement and contesting views on the rules of zakah at our time.
One of the major applications of the ruling of zakah that has generated much research and scholarly debate is the zakah on income (including rental income). As al-Qardhawi writes in his book Feqh al-Zakah (p.264), this is a subject for which a contemporary Muslim scholar, Sheikh Muhammad al-Ghazzali, called for a collective scholarly research.
To be more specific, there seems to be two views on rental income. Zarruq has summarised these in his Sharh al-Risalah (1:329):
- The view that holds that zakah is due on the value of the property when it is sold. This view looks at the property as a wealth.
- The view that holds that zakah is due on the income of the property when it is acquired. This view looks ta the property as a capital for production.
Among those who hold the latter view there seems to be two main opinions on what the rate of zakah from the rental income should be:
- The view that this should be treated as wealth and therefore 2.5% is due
- The view that this is analogous to agricultural production and therefore (due to use of one source of production only), 10% is due.
The latter view is the one that I feel more comfortable with. This is the view of scholars like Abu Zahra, Abd al Wahhab Khallaf and Abd al Rahman Hasan (Halqat al Dirasat al Ijtima 'iyah lil Jami'ah al 'Arabiyah, third session, pp. 241-242.) as well as the present day Egyptian scholar al-Qardhawi and as you know it is also the view of Javed Ahmad Ghamidi.
The above is based on the view that the guideline of the prophet (pbuh) about agricultural products is not just a specific ruling about the agricultural industry, rather, it was a ruling that reveales a principle that is not limited to agriculture. According to my current understanding, the principle is as follows:
“Any income that is gained using both capital and labour will have the of 5% for zakah. If however this income is gained using only one of capital or labour then the rate of zakah will be 10%”.
In other words, according to the above understanding, we should not apply the ruling that is for wealth (rate of 2.5%) to the income. Rather, the ruling of agricultural product should be generalised and applied to any source of income.
Based on the above, if we look at the rental income we can definitely agree that capital (that is the property) is used for generating it. Normally no significant labour is used for generating rental income.
The conclusion from the above will be that from the above list of rates of zakah, it is only 10% that can be applicable to rental income.
I should also add that according to the understanding that results in the above proportions of zakah, zakah is actually the tax that a Muslim citizen pays. Consequently no other tax can be imposed on Muslim citizens. At our time where there is no state governed zakah system, a Muslim may deduct the tax that he is paying to the state from his due zakah and only pay the balance if there are any.
The contesting view is that income equals to wealth and therefore only 2.5% applies to it, meaning same applies to rental income. Traditionally, the advocates of this view do not consider zakah to be the same as state tax and therefore do not include the tax as part of their due zakah.
As I stated above the application of Zakah rates is a feqhi issue and there can be different scholarly opinions about it without necessarily resulting to something that is clearly against the Shari’ah.
The above reasoning was based on Javed Ahmad Ghamidi's view. In my understanding the due zakah is the very tax that the state demands. Therefore the zakah of a rental property is the tax that the respective state demands for that property.
- Zakah on Residential Plot
- Concerns on opinion on Zakat on Professional Services/Salary Income
Revised: July 2016