11th March 2026
Question: Is investment permissible in Islām as I have heard conflicting views on this matter? Please explain how it works and how is Zakāt calculated on Investments.
الجواب حامداً و مصلياً
In the name of Allāh, the Most Gracious, the Most Merciful
Answer
In response to your inquiry, investment refers broadly to the allocation of capital with the purpose of generating wealth. Stocks, on the other hand, are specific types of assets representing ownership in a company through shares purchased via authorised agents. So, investing involves individuals using their funds to purchase equity in a company, thereby profiting from its growth potential. Companies possess various assets, including stocks, and often issue shares to raise capital for business expansion. When an individual, such as Person ‘A’, acquires 20% of a company’s shares for £500, they effectively obtain a 20% ownership stake in the company’s assets and become a shareholder. Unlike traditional transactions between two parties, stock purchases grant investors proportional ownership in a corporation alongside other shareholders.
Typically, shareholders transact through company-appointed or independent agents who facilitate investments on their behalf. Companies issue shares both to generate additional revenue for growth purposes and to provide investors with opportunities for profit. Shareholders receive certification as evidence of their ownership percentage. The extent of ownership is directly related to the amount invested, greater investment results in a larger shareholding. While shareholders may benefit financially from the company’s success, they also assume the risks inherented in any investment, as returns are not guaranteed.
Investors make money in one of the following two ways.
- Increase in Capital Gain – This simply means that you purchase stocks and hold on to it until the company grows and resell it onto interesting buyers with profit. If you purchased 20% for £500 ad not that stock in a few months increases to £700 then you sell it at that price (£200 profit).
- Dividend – The goal is to remain as a shareholder in the company and benefit from the profit accrued on the initial investment. The profits your gain is known as dividend.
From the fiqh perspective, the laws of investments in a company are similar to Islamic concept of musharakah (partnership) system.[1] Companies operate differently with varying assets and trading methods. The Islamic legality will depend on the following conditions.
- The investment stock must be halal. Investing in companions such as alcohol, insurance, pornography etc are strictly forbidden.
- Investing in fixed and raw assets only. If the stocks are in liquid forms (cash) then it is not permissible and the dividend will be tantamount to interest (if the returns are more or less than the initial investment).
- The company does not deal with interest (or any unlawful transaction). If they do and the entire company’s stock revolves around interest dealings, then it will be prohibited to invest. Contrarily, if the interest amount is minimal and not the objective in itself but raw assets, then investing would be permissible. When receiving the returns, if it is possible to identify the amount of interest then to dispose of that portion by giving it away to the neediest without the intention of reward.
- Does not involve in transactional sales forbidden in the Shariah e.g. selling stocks before taking possession over them (e.g. short sales), bonds, future sales, non-existent stocks, deception and so forth.[2]
The confusion surrounding the legality of investments is tied to the conditions mentioned above. It’s not possible to make a general judgment without understanding the company’s assets and trading practices. With that in mind, it’s recommended to either independently confirm the details with the company before investing or to consult trustworthy and legitimate Halal investment professionals.
Calculating Zakāt on stocks depends on the purpose of investment. If it is for capital gain then following the laws of Zakāt on sales, Zakāt will be calculated on their market value. If the purpose is not to resell but to benefit from the annual dividends then Zakāt will be calculated on the Zakatable assets only such as the profits gained, cash, gold, silver etc. Fixed assets such as clothes, building, machines, phones etc won’t be Zakatable.
[Allãh Knows Best]
Written and researched by (Mufti) Abdul Waheed
Answer Attested by Shaykh Mufti Saiful Islam
JKN Fatawa Department
[1] This is based on Shaykh Maulana Ahsraf Ali Thanvi’s view. However, though investments do not bear full similarity with the Islamic model of Musharakah, they are still subjected to the similar conditions.
[2] For mor details see, Shariah standards, pp. 560-566, Mufti Radha ul-Haq, Fatawa Darul ulum Zakariyyah, vol 5, pp. 219-222, Mufti Taqi Usmani, Islām aur Jadeed Ma’ayish, pp. 85-94, Mufti Taqi Usmani, Fiqhi Maqalat, vol 1, p. 141-156, Shaykh Khalid Sayfullah Rahmani, Jadeed Fiqhi Masail, vol 1, p. 378 & vol 4, p. 249