Zakat on Stocks and Funds
The Ruling Follows Intent
This detail was worked out by contemporary fiqh bodies: the Fiqh Council of North America (FCNA), AAOIFI Shariah Standard No. 35 (clause 4/2/4), and International Islamic Fiqh Academy Resolution No. 121. Together they determined that the zakat ruling on stocks follows the owner's intent and manner of dealing with them, not the type of stock itself.
The Active Trader
Someone who buys and sells to capture price movements, looking at price fluctuation rather than the company's performance, treats their stock as a commodity (trade goods), and so owes zakat on the full market value of their portfolio on the day the hawl is complete. Example: a trading portfolio worth $100,000 → zakat = 100,000 × 2.5% = $2,500.
The Long-Term Investor
Someone who buys with the intent to hold for a year or more, to benefit from the company's growth, is considered a partner in its business activity, and so does not owe zakat on the full value of their share, only on the zakatable portion of the company's assets (cash + accounts receivable + inventory), proportional to their stake. In FCNA's original example: $100,000 invested in a company whose total value is $1,000,000 and whose zakatable assets are $300,000; the zakatable percentage = 300,000 ÷ 1,000,000 = 30%, so zakat = 2.5% × 30% × 100,000 = $750. When precise balance-sheet data is unavailable, the zakatable percentage is estimated at about 30% of market value (a historical average for the S&P 500 index); specialized tools such as Zoya provide updated percentages for individual funds (for example, roughly 11.7% for the SPUS fund and roughly 14.2% for HLAL in that tool's estimates); these figures change over time and with the calculation methodology used.
Index Funds and Mutual Funds
Index funds (ETFs) and mutual funds are treated as a basket of stocks in the same way, applying the zakatable-percentage analysis to the fund's underlying holdings. FCNA did not distinguish between dividend-paying stocks and growth (capital-gains) stocks, since both are a return on the company's profits.
Purification: Not Zakat
Purification is an entirely separate matter from zakat: it is the cleansing of income mixed with a non-compliant source (such as incidental interest income) by giving away the proportion of non-compliant revenue from profits and dividends, without intending the reward of charity, since it is a removal of impurity rather than an act of charity one is rewarded for. Purification does not substitute for zakat, and this version of the platform does not include a calculator for it.