Answered by Shaykh Faraz Rabbani
When calculating zakat, how does one account for money which has been lent to third parties?
Walaikum assalam,
Zakat would not be due on money that has been lent out until you get it back into your possession.
Wassalam,
Faraz
Shaykh Abu Usamah: When the money is got back Zakah will have to be paid for all the previous years as well. Hence it is easiest to pay the Zakah on money lent out each year treating that loan as a Zakatable asset and paying the Zakah upon it even though you have not yet received any repayment towards it
E.g. Zayd lent Bakr $ 4000
On 1st Ramadan Zayd’s Zakah Year ends. He will therefore calculate his Zakah thus:
Cash : (say suppose) $ 10 000
Loan to Bakr : $ 4 000
Total Assets $ 14 000
Zakah at the rate of 2.5% will be paid on $14 000 assuming there are no other assets or liabilities.
Abu Usamah