Zakat on Investments: The Complete Calculation Guide

The Foundation: Why Investments Are Zakatable

Zakat is obligatory on wealth that has reached nisab (the minimum threshold) and been held for a complete lunar year (hawl). Investment assets — stocks, ETFs, crypto, gold, cash — are forms of wealth. If your total zakatable assets exceed nisab on your zakat anniversary date, you owe 2.5%.

This is clear from Quranic principles and scholarly consensus. The challenge for modern Muslims is applying 7th-century principles to 21st-century financial instruments — something Islamic scholars have worked extensively to address.

Nisab — The Minimum Threshold

You only owe zakat if your zakatable assets exceed nisab. Nisab is calculated in two ways:

• Gold nisab: 85 grams of gold × current gold price
• Silver nisab: 595 grams of silver × current silver price

Because silver has become much cheaper than gold, silver nisab is significantly lower. Most scholars recommend using the gold nisab for investments (more common scholarly position), but the silver nisab is also valid — and since it's lower, more people become obligated to pay zakat. Consult a scholar for your specific situation.

As of early 2026, the gold nisab is approximately $7,500-8,000 USD (changes with gold price). Check a current zakat calculator for the precise figure.

Zakat on Stocks

Method 1: The Simple Approach (Active Trading Intent)

If you hold stocks with the primary intention to trade them for profit (like an inventory), zakat is on the full market value of your holdings:

Zakat = Market value of shares × 2.5%

Method 2: The Company Assets Approach (Long-Term Investment Intent)

If you hold stocks as long-term investments (not primarily to trade), you can use the more detailed method:

Zakat = (Zakatable assets per share × number of shares) × 2.5%

Zakatable assets per share = company's (cash + receivables + inventory) per share

The idea is that you only owe zakat on the company's zakatable assets (cash, receivables, goods for sale) — not on fixed assets like buildings, equipment, and goodwill.

Which Method to Use?

Most scholars recommend Method 1 (full market value) for most retail investors because:

• Most retail investors primarily hold stocks for capital growth and dividends, which is effectively trade intent
• Method 2 requires detailed company financial data that's impractical to access for most investors
• Method 1 is simpler, clearer, and errs on the side of caution

The AAOIFI standard for investment funds uses Method 2 at the institutional level. Apps like Zoya calculate using a hybrid of both approaches.

Zakat on ETFs

ETFs are treated like stocks for zakat purposes:

• Equity ETFs (SPUS, HLAL): Zakat on full market value at 2.5%
• Gold ETFs (GLD, IAU): Zakat on the market value at 2.5% (gold is always zakatable)
• Sukuk ETFs: Zakat depends on the underlying assets — check with your ETF provider's Sharia board

Zakat on Cryptocurrency

Most contemporary scholars who consider cryptocurrency halal also consider it zakatable. The calculation is straightforward:

Zakat = Market value of crypto holdings on your zakat anniversary date × 2.5%

Use the USD (or local currency) value on your zakat date. Crypto held for investment purposes is treated like trade inventory.

One complexity: crypto prices are highly volatile. Use the price on your specific zakat anniversary date, not an average. Some scholars suggest using the lowest price of the year, others the price on the exact date — the exact date is simpler and more common.

Zakat on Gold

Gold is one of the original zakatable assets. Rules:

• Threshold: 85 grams of pure gold (after one year of ownership)
• Rate: 2.5% of the value
• Physical gold: Value the gold at market price on your zakat date
• Gold ETFs: Value your holdings at market price
• Jewelry worn regularly: Many scholars exempt personal-use jewelry from zakat; stored/investment gold is always zakatable

Zakat on Real Estate

• Primary residence: Not zakatable (not held as wealth, used as shelter)
• Rental property (held long-term): Zakat on net rental income only at 2.5%, not on the property value
• Property held for resale: Zakat on full market value at 2.5%
• REITs: Zakat on market value of your REIT shares at 2.5%

Zakat on Retirement Accounts (401k, IRA)

This is a frequently asked question. Scholarly positions vary:

• If you can access the funds: Zakat is due on the full value, minus any penalty you'd pay to withdraw
• If funds are locked until retirement: Some scholars defer zakat until you can access the funds; others say you owe zakat now but can pay from other assets
• 401k employer match (unvested): Not zakatable until it vests

The majority view is: if you have other assets to pay from, pay zakat on the full 401k/IRA value. If you'd have to liquidate the account to pay zakat, defer to when the funds become accessible.

A Complete Example

Let's say on your zakat anniversary, you have:

• $30,000 in halal stocks (HLAL ETF)
• $5,000 in Bitcoin
• $2,000 in gold ETF (IAU)
• $10,000 in a savings account

Total zakatable assets = $47,000 — this exceeds nisab

Zakat owed = $47,000 × 2.5% = $1,175

Bottom Line

Zakat on investments is a real obligation for Muslim investors who have reached nisab. The calculation is straightforward: 2.5% of your zakatable investment assets on your annual zakat date. Use apps like Zoya or the NZF Zakat Calculator to make this easier. Pay it on time — it purifies your wealth and fulfills one of the most important pillars of Islam.