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ZAKAT on property how to pay Zakat on the property in Pakistan?

Zakat is the 4th pillar of Islam. Zakat is a religious obligation for those Muslims who possess a specific set of amounts or assets for a specific period of time. A fixed criteria has been set, if a Muslim fulfills the fixed financial criteria she/he has to pay the Nisab, a specific sum of money to the needy or underprivileged people according to the doctrine of Islam.
The basic purpose of zakat is to cleanse the wealth & distribute it among the needy & poor to remove the disparities. Zakat is paid for both tangible & intangible properties. Real Estate Property is also tangible assets that include in Nisab.

Property Tax & Nisab.

The Zakat on the property only depends on the Nisab. The Tax & Nisab are totally different terminologies, methods & procedures. Nisab of zakat is a minimum amount of money or wealth that is held for at least one year by the owner. The nisab by the gold standard is 3 ounces of gold (87.48 grams) or its cash equivalent for the owner. The nisab by the silver standard is 21 ounces of silver (612.36 grams) or its equivalent in cash or any other form of the asset as according to Islam.
Note : Please keep in mind that the price of gold and silver change with the passage of time. Before making your zakat calculations, kindly refer to the current gold and silver rate in your country.

When is Zakat Applicable to the Property?

Zakat is only applicable to certain types of properties like, usually, zakat is applicable to properties that will further be used for rentals and reselling purposes. In other words, all the capital assets which generate income will be applicable for zakat.

Land for Resale purpose

If the land is brought for resale purpose, then it is treated as commercial good. The Zakat on the property according to its current value on the owner’s zakat date.

Building for Reselling purpose

If you are building a residential building for reselling purposes then you will have to pay zakat on the property for it. The money you receive for selling that building will be liable to zakat at the rate of 2.5% on the day you receive the money. For later years, it is part of your money and it will be subjected to zakat in the normal way.
Some people prefer residential properties over commercial properties & this debate is always under the limelight.

ZAKAT for Plots

There is no zakat on the property of plots purchased to build houses for giving out on rent and earning income by the owners. But there will be zakat on the savings from the rental income when it exceeds the fixed Nisab criteria. Some people prefer saving over investing money.

When is Zakat Not Applicable to the Property?

Unlike the above-mentioned properties, certain properties cannot be subject to zakat. In the following cases, zakat on the property is not eligible.

Residential Properties

Zakat does not apply to the properties of your personal use. There is no zakat for the residential property where you are living with your family. It is a necessity of life because there is no stream income in it.

Investment in Properties

Zakat on the property or a real estate investment property depends on the income you are getting from it. Zakat does not apply to the commercial properties that you are using to accomplish any business idea. These buildings include showrooms, shops, factories, or any other office building.

ZAKAT for Agricultural Land

If you own agricultural land, you are not supposed to pay zakat for agricultural land. Zakat on the property of agriculture land is not applicable However, if you have saved through the agricultural land and that exceeds the fixed criteria of Nisab then you will have to pay zakat.

Ownership of Land

If you sell the land you within a month or a year, then you must have to pay zakat for the full value at the rate of 2.5% for the needy & poor.
In the case of plots, if you have not paid in full, the zakat will only be applicable to the receiving amount. For example, consider the zakat for an installment property. If you received 40% of the price of a plot, then you will calculate your zakat based on this 40% of the amount if it exceeds the fixed nisab criteria. In this ways, zakat on the property will be eligible.

ZAKAT Development Properties

If you have a land that is planned to be used for development is not liable for zakat because later on, it becomes a part of capital assets.
A land kept for years before re-sale, is considered always for selling at the right price, will not be liable to zakat until it is sold. The zakat will be applied to the full amount received.

How to Calculate Zakat on the Property?

The zakat calculation on the real estate property is simple. You just need to understand your asset value and how nisab works in Islam and you are good to go for zakat.
A land kept for years before re-sale, is considered always for selling at the right price, will not be liable to zakat until it is sold. The zakat will be applied to the full amount received.
You will understand the zakat process that how to calculate zakat on the properties on the with the following example
The total value of your property: Rs.10, 00,000
Zakat Calculation: Rs.10, 00,000*2.5%= Rs.25, 000
Hence, there is a zakat amount Rs.25, 000 which you can pay throughout the year. So the Zakat on the property is 25,000
Distribute the zakat into needy and less fortunate people & needier. According to Islam, you can give zakat to the following people.

The Poor (people who have no source to earn a livelihood)
The Needy (people who cannot fulfill their basic needs)
The Zakat collectors
Recently converts in Islam
Stranded travelers
Those people who are working for the religious cause
People who have debt

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