Zakat on Money Set Aside for Payment Due Later

By Mufti Ebrahim Desai
Posted: 27 Sha'ban 1423, 3 November 2002

Q.) Zaid pays his yearly zakat on the first day of Ramadhan. Construction of his new house has just started. He has signed a contract in which he has to pay for the construction in 5 installments. He has set aside $250 thousand dollars in his bank account for the 5 installments. Under this arrangement he has already paid $100 thousand dollars. He still has to pay $150 thousand and is keeping that in his bank account.

Now when the first day of Ramadan comes, does he have to pay zakat on the $150 thousand dollars which are set aside for the construction of his house or not?

A.) If you have an amount more than the Nisab in your possession at the end of the year, then you have to pay Zakat on that, i.e. you have to pay on the 150 thousands dollars as well.

However, as an alternative in this situation, Zaid should try and pay off the entire amount before the end of the year so that he doesn't have to pay Zakat at the end of the year. And Allah Ta'ala Knows Best