5th July 2021
Question: How does one calculate Zakāt on savings through committee or kitty savings? It’s a type of saving scheme where a group of people contribute monthly a specific amount into a pot for a certain period and whoever’s name comes out is their turn to take the full sum. They must continue to contribute monthly to reimburse all of the members. Appreciate if you could provide a detailed answer on this matter.
الجواب حامداً و مصلياً
In the name of Allāh, the Most Gracious, the Most Merciful
Answer
The type of scheme you have briefly described is very common amongst South Asian Indo-Pak community. It is a scheme where members support one another to receive a large sum of money in a short period which can take up to months or years to save. Many join this scheme either for personal savings or to fulfil large financial costs such as paying off a large sum of debt, pay a deposit for a mortgage, cash their house or for other essentials. The way the scheme works is that you have members comprising of family, relatives and acquaintances who mutually contribute monthly or weekly into a pot. The number of participants vary depending on the agreed duration and the amount received. The trustee takes responsibility for safe-keeping all of the weekly or monthly contributions into a pot. The trustee then draws a list of the names of the members for each week or month and whoever’s turn it is, they receive the large sum.
To illustrate this, let’s say for instance there are 24 members; each person contributing a sum of £200 a month and the committee durations lasts up to two years from January 2021 to December 2022.[1] The sum of £200 is collected at the 1st of every month. This means that each person receives in total £4,800 through this committee scheme. A trustee draws up a list of names of all of the members for each month and whoever’s turn it is, they receive the full amount at the beginning of the month.[2] Each participant after receiving the sum of £4,800 on their turn must continue to pay the monthly £200 until the end of term (in our example, December 2022). So long as you contribute, you are the creditor but once you’ve taken the funds on your turn, you now become the debtor. In other words, you’ve taken back what you contributed so far but now fall into debt of the remainder by taking everyone else’s monthly contribution which is why you continue to give £200 every month thereafter so to reimburse all members. Hence it is a crediting and borrowing base system. The only person who doesn’t incur any debt is the one receiving the large sum on their turn at the end as by then, the contract ends. In short, the principle being that your initial contribution before your turn belongs to you but whatever you receive surplus to your initial contribution on your turn now belongs to someone else. It is important to note that accessing the funds is not like a typical personal savings in one’s bank account where one can access them at any time. You only receive the large sum upon your turn.
The implication this has when calculating Zakāt on funds received through such schemes depends on the following issues namely; ownership, paying Zakāt on debt, savings utilised for essential needs and the elapsing of a complete lunar year. To explain further, firstly according to the general principle as outlined by the jurists, Zakāt becomes necessary if a person fully owns the savings by which they mean both ownership and physical possession.[3] Once the savings reach the Nisāb threshold and a complete lunar year has elapsed then Zakāt becomes obligatory except that paying it immediately is not necessary until after taking possession over it on their turn.[4] If you are the last person to receive the funds then Zakāt must be paid on the previous years as well. [5] It is necessary to calculate Zakāt on the amount you have contributed until your turn as after that is debt. So, for instance, in light of the above example if someone receives £4,800 after twelve months then they only need to calculate Zakāt on £2,400 once a complete lunar year has passed as the remaining half is now a debt.[6] When receiving the funds on your turn and the amount has not reached the Nisab then Zakāt is not necessary. For instance, you received the £4,800 after a month then since you have only contributed £200 only so far (which is below the current Nisab rate) it won’t be Zakatable as the remainder £4,600 is a debt.
A second important issue to be considered is whether the savings will be used for one’s essentials or not. Zakāt only applies if the savings were not used for any personal essentials. As was highlighted above that people join the committee scheme to pay off large sums to either fulfil personal debt or for their essential needs, for instance refurbishing home etc. In light of the above example if the savings despite reaching the Nisāb threshold, was used for personal essentials or to repay someone else’s debt instantly then calculating Zakāt would not be necessary at all. [7]
This now leads onto the final point that is calculating Zakāt on debt. As was explained that each member incurs a debt through this scheme on the residue amount. The monthly contribution of £200 after receiving the funds is to reimburse everyone else. The general principle is that Zakāt is not levied on debt however, contemporary scholars have distinguished between long-term and short-term debt. Long-term debt refers to debt owed beyond twelve months and short-term debt are those debts owed within 12 months. The general view is that only short-term debts are deductible from Zakāt but Zakāt must be calculated on long-term debts, debts that remain with the person beyond twelve months.[8] Going by the above example, if for instance a person received £4,800 after three months then excluding the £600, they will deduct from the remaining £4,200 debt the £200 monthly payment until that year’s Zakāt due date within 12 months. The remaining debt beyond that which is classed as long-term debt will not be deductible i.e. Zakāt must be paid on it in addition to the £600. In another scenario, for instance a person receives £4,800 after fifteen months then besides the £3,000 (the total savings) the residue debt of £1,800 if paid within the year then will be deducted from Zakāt.
The above was a general guide to calculating Zakāt on committee funds. We have tried simplifying as much as possible to avoid overcomplicating its understanding. It is appreciated that only those involved in the scheme are able to relate to the examples given. What is important to remember is that how you classify the funds has implications on the ruling of Zakāt. The funds received on your turn is a combination of savings and debt provided you are not the last person on the list to receive it. Zakāt however will not apply if all of the funds are used to fulfil basic needs before your Zakāt due date within twelve months according to the lunar calendar. In the case of confusion, it is recommended to speak to a reliable and experienced Mufti for further clarification regarding your specific matter.
[Allãh Knows Best]
Written and researched by (Mufti) Abdul Waheed
Answer Attested by Shaykh Mufti Saiful Islam
JKN Fatawa Department
[1] In most committee schemes, the duration extends when more people intend to join which increases the savings.
[2] Some trustees instead of drawing up a list prioritise those in need to receive the full savings at the beginning of the month.
[3] Fatawa Hindiyyah, Kitāb al-Zakat, vol 1, p. 170
الْبَابُ الْأَوَّلُ فِي تَفْسِيرِهَا وَصِفَتِهَا وَشَرَائِطِهَا
مِنْهَا الْمِلْكُ التَّامُّ وَهُوَ مَا اجْتَمَعَ فِيهِ الْمِلْكُ وَالْيَدُ وَأَمَّا إذَا وُجِدَ الْمِلْكُ دُونَ الْيَدِ كَالصَّدَاقِ قَبْلَ الْقَبْضِ أَوْ وُجِدَ الْيَدُ دُونَ الْمِلْكِ كَمِلْكِ الْمُكَاتَبِ وَالْمَدْيُونِ لَا تَجِبُ فِيهِ الزَّكَاةُ كَذَا فِي السِّرَاجِ الْوَهَّاجِ
Ibn Nujaym, Bahr Rāiq, Kitāb al-Zakat, vol 2 p. 218
شُرُوط وُجُوب الزَّكَاة
وَأَطْلَقَ الْمِلْكَ فَانْصَرَفَ إلَى الْكَامِلِ، وَهُوَ الْمَمْلُوكُ رَقَبَةً وَيَدًا فَلَا يَجِبُ عَلَى الْمُشْتَرِي فِيمَا اشْتَرَاهُ لِلتِّجَارَةِ قَبْلَ الْقَبْضِ، وَلَا عَلَى الْمَوْلَى فِي عَبْدِهِ الْمُعَدِّ لِلتِّجَارَةِ إذَا أَبَقَ لِعَدَمِ الْيَدِ، وَلَا الْمَغْصُوبِ، وَلَا الْمَجْحُودِ إذَا عَادَ إلَى صَاحِبِهِ كَذَا فِي غَايَةِ الْبَيَانِ، وَلَا يَلْزَمُ عَلَيْهِ ابْنُ السَّبِيلِ؛ لِأَنَّ يَدَ نَائِبِهِ كَيَدِهِ كَذَا فِي مِعْرَاجِ الدِّرَايَةِ، وَمِنْ مَوَانِعِ الْوُجُوبِ الرَّهْنُ إذَا كَانَ فِي يَدِ الْمُرْتَهِنِ لِعَدَمِ مِلْكِ الْيَدِ
Kasān, Badā’i Sanāi, Kitāb al-Zakat, vol 2 p. 9
فَصْلٌ الشَّرَائِطُ الَّتِي تَرْجِعُ إلَى الْمَالِ
وَمِنْهَا الْمِلْكُ الْمُطْلَقُ وَهُوَ أَنْ يَكُونَ مَمْلُوكًا لَهُ رَقَبَةً وَيَدًا وَهَذَا قَوْلُ أَصْحَابِنَا الثَّلَاثَةِ، وَقَالَ زُفَرُ: ” الْيَدُ لَيْسَتْ بِشَرْطٍ ” وَهُوَ قَوْلُ الشَّافِعِيِّ فَلَا تَجِبُ الزَّكَاةُ فِي الْمَالِ الضِّمَارِ عِنْدَنَا خِلَافًا لَهُمَا.
[4] One may however choose to pay it in advance if they want to that is
[5] This is the general rule otherwise one may choose to pay beforehand if they wish.
Kasān, Badā’i Sanāi, Kitāb al-Zakat, vol 2 p. 9
فَصْلٌ الشَّرَائِطُ الَّتِي تَرْجِعُ إلَى الْمَالِ
وَتَجِبُ الزَّكَاةُ فِي الدَّيْنِ مَعَ عَدَمِ الْقَبْضِ، وَتَجِبُ فِي الْمَدْفُونِ فِي الْبَيْتِ فَثَبَتَ أَنَّ الزَّكَاةَ وَظِيفَةُ الْمِلْكِ وَالْمِلْكُ مَوْجُودٌ فَتَجِبُ الزَّكَاةُ فِيهِ إلَّا أَنَّهُ لَا يُخَاطَبُ بِالْأَدَاءِ لِلْحَالِ لِعَجْزِهِ عَنْ الْأَدَاءِ لِبُعْدِ يَدِهِ عَنْهُ وَهَذَا لَا يَنْفِي الْوُجُوبَ كَمَا فِي ابْنِ السَّبِيلِ.
Ibn Nujaym, Bahr Rāiq, Kitāb al-Zakat, vol 2 p. 225
شُرُوط وُجُوب الزَّكَاة
وَقَدَّمْنَا أَنَّ الْمَبِيعَ قَبْلَ الْقَبْضِ لَا تَجِبُ زَكَاتُهُ عَلَى الْمُشْتَرِي وَذَكَرَ فِي الْمُحِيطِ فِي بَيَانِ أَقْسَامِ الدَّيْنِ أَنَّ الْمَبِيعَ قَبْلَ الْقَبْضِ، قِيلَ: لَا يَكُونُ نِصَابًا؛ لِأَنَّ الْمِلْكَ فِيهِ نَاقِصٌ بِافْتِقَادِ الْيَدِ، وَالصَّحِيحُ أَنَّهُ يَكُونُ نِصَابًا؛ لِأَنَّهُ عِوَضٌ عَنْ مَالٍ كَانَتْ يَدُهُ ثَابِتَةً عَلَيْهِ، وَقَدْ أَمْكَنَهُ احْتِوَاءُ الْيَدِ عَلَى الْعِوَضِ فَتُعْتَبَرُ يَدُهُ بَاقِيَةً عَلَى النِّصَابِ بِاعْتِبَارِ التَّمَكُّنِ شَرْعًا اهـ فَعَلَى هَذَا قَوْلُهُمْ: لَا تَجِبُ الزَّكَاةُ مَعْنَاهُ قَبْلَ قَبْضِهِ
وَأَمَّا بَعْدَ قَبْضِهِ فَتَجِبُ زَكَاتُهُ فِيمَا مَضَى كَالدَّيْنِ الْقَوِيِّ،
[6] So the remaining 12 months of £200 will be deducted from their Zakat calculation.
[7] Durrul Mukhtār wa hashiyah Ibn Ābideen Shāmi, Kitāb al-Zakat, vol 2 p. 260
(فَارِغٍ عَنْ دَيْنٍ لَهُ مُطَالِبٌ مِنْ جِهَةِ الْعِبَادِ)
قَوْلُهُ فَارِغٍ عَنْ دَيْنٍ) بِالْجَرِّ صِفَةٌ نِصَابٍ، وَأَطْلَقَهُ فَشَمِلَ الدَّيْنَ الْعَارِضَ كَمَا يَذْكُرُهُ الشَّارِحُ وَيَأْتِي بَيَانُهُ، وَهَذَا إذَا كَانَ الدَّيْنُ فِي ذِمَّتِهِ قَبْلَ وُجُوبِ الزَّكَاةِ، فَلَوْ لَحِقَهُ بَعْدَهُ لَمْ تَسْقُطْ الزَّكَاةُ لِأَنَّهَا ثَبَتَتْ فِي ذِمَّتِهِ فَلَا يُسْقِطُهَا مَا لَحِقَ مِنْ الدَّيْنِ بَعْدَ ثُبُوتِهَا جَوْهَرَةٌ
vol 2 p. 262
(وَ) فَارِغٍ (عَنْ حَاجَتِهِ الْأَصْلِيَّةِ) لِأَنَّ الْمَشْغُولَ بِهَا كَالْمَعْدُومِ
قَوْلُهُ: وَفَارِغٍ عَنْ حَاجَتِهِ الْأَصْلِيَّةِ) أَشَارَ إلَى أَنَّهُ مَعْطُوفٌ عَلَى قَوْلِهِ عَنْ دَيْنٍ (قَوْلُهُ وَفَسَّرَهُ ابْنُ مَلَكٍ) أَيْ فَسَّرَ الْمَشْغُولَ بِالْحَاجَةِ الْأَصْلِيَّةِ وَالْأَوْلَى فَسَّرَهَا، وَذَلِكَ حَيْثُ قَالَ: وَهِيَ مَا يَدْفَعُ الْهَلَاكَ عَنْ الْإِنْسَانِ تَحْقِيقًا كَالنَّفَقَةِ وَدُورِ السُّكْنَى وَآلَاتِ الْحَرْبِ وَالثِّيَابِ الْمُحْتَاجِ إلَيْهَا لِدَفْعِ الْحَرِّ أَوْ الْبَرْدِ أَوْ تَقْدِيرًا كَالدَّيْنِ، فَإِنَّ الْمَدْيُونَ مُحْتَاجٌ إلَى قَضَائِهِ بِمَا فِي يَدِهِ مِنْ النِّصَابِ دَفْعًا عَنْ نَفْسِهِ الْحَبْسَ الَّذِي هُوَ كَالْهَلَاكِ وَكَآلَاتِ الْحِرْفَةِ وَأَثَاثِ الْمَنْزِلِ وَدَوَابِّ الرُّكُوبِ وَكُتُبِ الْعِلْمِ لِأَهْلِهَا فَإِنَّ الْجَهْلَ عِنْدَهُمْ كَالْهَلَاكِ، فَإِذَا كَانَ لَهُ دَرَاهِمُ مُسْتَحَقَّةٌ بِصَرْفِهَا إلَى تِلْكَ الْحَوَائِجِ صَارَتْ كَالْمَعْدُومَةِ، كَمَا أَنَّ الْمَاءَ الْمُسْتَحَقَّ بِصَرْفِهِ إلَى الْعَطَشِ كَانَ كَالْمَعْدُومِ وَجَازَ عِنْدَهُ التَّيَمُّمُ.
[8] For more details on this see our fatwa