Quick Answer
Zakat on a business is 2.5% of net zakatable assets: Inventory (for sale) + Cash & bank + Receivables − Short-term debts. Fixed assets like machinery and buildings are NOT zakatable.
What Is Zakat on Business?
Zakat on business wealth applies to assets held for trade, based on Qur'an 2:267. The key principle: only trading assets attract Zakat, inventory, cash, and receivables. Fixed productive assets like machinery, vehicles, and premises do not, since they are means of generating wealth, not wealth itself.
Business Zakat is calculated once per year (Hawl) on net zakatable assets: goods held for sale + business cash + customer receivables − short-term liabilities. This is distinct from personal Zakat, a business owner may owe both.
How to Use
- 1Enter the current market value of business inventory (goods held for sale, not equipment).
- 2Enter all cash and bank balances the business holds.
- 3Enter receivables, money customers owe you that you expect to collect.
- 4Enter short-term debts due within the year.
- 5Zakat = 2.5% of (Inventory + Cash + Receivables − Debts), if positive and above Nisab.
Formula
Net zakatable assets
Net = Inventory + Cash + Receivables − Short-term DebtsZakat due
Zakat = Net × 2.5% (if Net ≥ Nisab)Example: Inventory 500,000 · Cash 100,000 · Receivables 50,000 · Debts 80,000
- Net = 500,000 + 100,000 + 50,000 − 80,000 = 570,000
- Zakat = 570,000 × 2.5% = 14,250
Zakat due on the business: 14,250
Tips & Things to Know
- Fixed assets (machinery, vehicles, buildings, computers) are NOT zakatable.
- Only short-term liabilities due within the year are deductible, not long-term loans or mortgages.
- Doubtful receivables unlikely to be collected are generally excluded by conservative scholars.
- Inventory is valued at current market (selling) price, not cost price.
- Finished goods held for sale are valued at market (selling) price. Raw materials and work-in-progress are valued at cost, as they are not yet tradeable goods.
- If your accounting year-end differs from your Zakat Hawl anniversary, calculate Zakat on the actual Hawl date, the Hawl follows the Islamic lunar calendar, not the tax or financial year.
- A sole trader's personal and business Zakat are calculated separately but both are due on the same Hawl date. Personal cash and savings are included in personal Zakat; business trading assets are included here.