Answered by Sidi Salman Younas
We learned that any merchandise which you purchase with the intention of trade, zakat is due on it as on your savings, if they amount to that quantity of gold / silver which makes zakat obligatory. Now lets say you are in debt $10,000 (for example), and you own merchandise that amounts to $12,000, is the zakat due only on the $2,000? Also you owe zakat on the value of the merchandise, if it amounts to the amount of gold that makes zakat wajib — is the “value” of the merchandise the cost that you paid for it (your wholesale cost), or the retail price that you will be selling it for? Also, if you acquire some new goods / earnings at the middle of the year, how do you deal with paying zakat on that at the end of the year?
I pray you are well.
Zakat is due when a morally responsible Muslim possesses the nisab, above and beyond his debts and immediate expenses, and a lunar year passes over it. In calculating one’s zakat one calculates all his zakatable wealth together, which includes:
(a) Cash – whether in currency form or in the bank,
(b) Gold and Silver,
(c) Money lent out,
(d) Trade goods,
(e) Stocks, and
(f) Agricultural produce.
Thus, you will not only consider your trade goods alone but all your zakatable assets together – on which you will be obligated to pay 2.5 percent.
For example, if one possess $1000 of cash – in currency and his bank account -, $1500 of gold and silver, and $2500 in trade goods then his total zakatable assets amount to $5000 [he has no money lent out, stocks, or agricultural produce]. However, he also has a debt of $500 and his immediate monthly expense amounts to $500 also, which will be subtracted. If the minimal zakatable amount (nisab) is, suppose, $1000 such a person will be obligated to pay zakat since his total zakatable assets are $4000.
Fluctuations during the middle of the year are of no consequence, unless one’s amount reaches zero. Whatever amount one possesses, above the nisab, at the end of the his zakat year is the amount zakat is due upon regardless of when certain wealth was acquired. Therefore, if we take the previous mentioned example and add to it the fact that this person was given $10,000 as a gift a day before the end of his zakat year then he will pay zakat on $14,000.
As for the value of one’s trade goods, one takes into account the “current market value” of the goods and not the price one purchased it for.
And Allah Knows Best
Approved by Faraz Rabbani