Ruling on Zakah of Debts

Answer:

Praise be to Allah, the Lord of the Worlds; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions: Whoever has a debt on someone, and that debt has reached Nisab(the sum that equals the value of 85 grams of gold) by itself or when added to any sum that he already has, Zakah is due on it if he possessed it for a whole lunar year(Hawl) because it is a sum of money that meets the conditions of Zakah. Accordingly, Zakah is to be paid whether the debtor admits or denies the debt, or he was poor or rich, or it was due instantly or in deferred payments. Not having that money in possession does not mean that it isn't liable to pay Zakah . The manner of Paying Zakah depends on the kind of debt, which is either due instantly, or in deferred payments. Instant debt is of two kinds: First, it is due on a well-off person who is capable of paying it off at any time that he wills. Zakah is due on this kind at the end of every lunar year even if the creditor does not collect it as it is tantamount to possessed money, but at the safekeeping of another. Second, debt unlikely to be collected, or the debtor is stalling. Zakah is due for the past lunar years upon collecting it(debt) as stipulated by the Shafi`ite scholars, and this opinion is stricter since the Hanafi`ite scholars are of the opinion that Zakah is due on it for one lunar year upon its collection, and this is more facilitating. Zakah is due on merchandise offered for sale for Sommrah Ibn Jundob said: “Prophet Mohammad(PBUH) used to order us to pay Zakah on merchandise set for sale.”Narrated by Abu Dawood. At the end of the lunar year(Hawl), the merchandise is assessed in cash according to that time prices, and if it(merchandise) equals 85 grams of gold, or more, then Zakah is due it regardless of profit or loss. Zakah must be paid in cash not in kind.