Question: Do I pay Zakat on my Savings only or on my checking account too?
Answer: Zakat is due on ANY surplus wealth. It must be more than the Nisab and is in your possession after one year passes. This includes: Savings accounts, checking accounts, actively invested shares or Mutual Funds. It also includes cash on hand, gold and silver (bullion or jewelry, etc). If you own a business it includes any inventory or property which is currently for sale, as well as business accounts (similar to those above).
Example: Ahmed owns his own business. He has a savings account with 10k and a checking account with 4k. He also owns a car posted on Craigslist for sale at 8k. His business account contains 4.5k, and he does not own any business inventory. He has possessed Nisab for one year, and he usually pays his Zakat on the 1st of Ramadan. He will pay 2.5% on 26,500 USD. He will pay 662.5.
A questioner asks:
I purchased something for someone in US dollars equaling 6k in Airline tickets. Now he wants to pay me back, but we live in the Emirates and he can only pay in UAE dirhams.
Can I take dirhams as payment? What if he pays me off in installments?
In the name of Allah, Merciful benefactor, Merciful redeemer
Whenever you are recovering a debt, you have the right to demand payment in the original currency if you choose. However, you have the option to accept payment in any other currency with two conditions:
1- That the debt is calculated according to the spot exchange rate for that currency.
2- That there is no debt liability that is left after payment.
Above, you mentioned that you loaned dollars and now will accept dirhams. Let’s say you loaned this amount a year ago today
- On May-16-2011 6000USD = 22038.99AED
- On May-16-2012 6000USD = 22037.88AED
Despite the decrease of 1.11AED, you would take 22037.88AED as payment for your debt today, and the debtor should pay you in total. Even if the amount went up, you would still take whatever amount resulted from the current exchange rate. Paying off part of the debt and leaving off part of it is not permissible. By paying off the debt in part, you allow endless speculation on currency prices, which could lead to exploitation of currency fluctuations.
The proof for this is the hadith of Ibn Umar found in the Sunan where he says “there is no harm in doing so if it is at market price and no debt remains between you.”
And God knows best.