Q13. How do loans affect the obligation of Zakat?
In case of a loan, Zakat on the amount loaned to someone is primarily the obligation of the owner of the money, and the obligation is determined based upon the following conditions.
- If the borrower is expected to return the loan in the year in question, the lender (the owner) should include the amount in his calculations. There are two opinions within this, one is that this Zakat shall be paid every year, and the other opinion is that it should be paid for all the years the loan was outstanding upon its return.
- In case the repayment is not expected, there are three possible opinions.
- Once returned, pay Zakat for all years the loan was outstanding.
- Once returned, pay Zakat that year.
- Once returned, pay Zakat after one year has passed since the return.
- We favor the opinion that Zakat should be paid by the owner, upon repayment, in the year of repayment. Therefore, if a loan whose return is not expected, should be included if and when the loan is returned.
- The impact of loan on the borrower is already explained in answer concerning conditions that make Zakat obligatory.