Answered Shaykh Omar Subedār
Is Zakāh (mandatory charity) payable on stocks, shares, RRSPs, and RESPs?
Please find the answers to your questions below:
Stocks and Shares:
If stocks/shares are purchased with the intention of actively trading them, then zakāh will be given on the market value of the shares. If however the stocks/shares are purchased for the purpose of earning a dividend and to hold on to them over a long period of time then zakāh will be only given on the dividends and the market value of the inventory the corporation possesses (calculated according to one’s share of the ownership) – (this information is available in the financial statements of the corporation).
Zakāh will be paid on the current balance of the account minus the tax that would have to be paid if one was to cash out the funds on the very day he intends to pay zakāh. Some scholars have suggested that it is preferable to not deduct the tax and to pay zakāh on the entire account.
Since RESPs are invested for children and are registered under their name there is no zakāh that is due on them. However, if the investment exceeds the niṣāb and the child becomes mature he will be obligated to pay zakāh on the investment. He can either pay the annual due on the yearly bases or defer it until the investment matures and pay the total amount that was due upon him since he became mature.
- If an investment is made in an Islamically impermissible source e.g. ale manufacturers, the entertainment industry etc. or if the investment is interest bound e.g. bonds then the zakāh will only be calculated on the initial investment and the profit accumulated from the investment and will be given to the recipients of zakāh without expecting any divine reward.
- If the investment is made in a permissible source then zakāh will be calculated on the current market value of the investment.
And Allāh Knows Best