AAOIFI Shari'a screening · Reviewed July 16, 2026

How to calculate zakat on stocks

How much zakat you owe on shares depends on your school. The Sunni 2.5% method (trading vs long-term intent) and the Ja'fari khums approach followed by Ayatollah Sistani, with worked examples.

It depends on your school. Under the majority Sunni view, zakat on stocks is 2.5% once each lunar year: if you bought the shares to trade, you pay 2.5% of their full market value; if you hold them long-term for dividends, most contemporary councils have you pay 2.5% only on the zakatable portion of the company's assets behind your shares. Under the Ja'fari school followed by Grand Ayatollah Sayyid Ali al-Sistani, shares are not among the items zakat applies to, so they carry no zakat; instead khums, one-fifth of your yearly surplus, applies to the profit left at your khums year-end.

Sunni method, trading shares. If you buy shares intending to resell them for profit, they are treated like trade goods. At your zakat due date you pay 2.5% of their current market value, combined with your other zakatable wealth once it reaches the nisab. Example: a trading portfolio worth $40,000 on your zakat date owes $40,000 times 0.025, which is $1,000.

Sunni method, long-term investment shares. If you hold shares mainly for dividends and long-term growth rather than resale, most contemporary bodies (including AAOIFI Shari'a Standard No. 35 on Zakah and major fiqh councils) say you pay 2.5% only on the zakatable assets inside the company that your shares represent, such as cash, receivables, and inventory, not on fixed assets like factories and equipment. Where that breakdown is hard to obtain, a common simplification is to pay 2.5% on roughly a quarter to a third of the market value, or simply on the full value to be safe. Dividends received during the year are added to your zakatable cash.

Ja'fari (Shia) method. In the Ja'fari school, obligatory zakat is confined to nine specific items (gold and silver coin, wheat, barley, dates, raisins, camels, cows, and sheep). Company shares and modern paper money are not among them, so there is no zakat on the shares themselves. Instead the relevant annual obligation is khums: at your khums anniversary you pay one-fifth (20%) of the surplus that remains after your year's living expenses, which includes profit and dividends from your investments that you have not spent. Followers should apply this according to the guidance of their own marja.

Practical steps for either school. First, fix a fixed date in the lunar year (Sunni zakat) or your personal khums anniversary (Ja'fari). Second, value your holdings and add received dividends. Third, apply your school's rate: 2.5% of the zakatable base for Sunni zakat, or 20% of the yearly surplus for Ja'fari khums. Zakat and khums are separate obligations from investment purification, which removes the small non-permissible-income share and is calculated differently.

Methodology

Verdict applies the methodology of AAOIFI Shari'a Standard No. 21: Financial Papers (Shares and Bonds): qualitative screening for prohibited business activities, plus three quantitative caps. Interest-bearing debt < 30% of market cap, interest-bearing securities < 30%, and non-permissible income < 5% of revenue.

Sources and scholars

  • AAOIFI Shari'a Standard No. 35: Zakah
  • Egypt's Dar al-Ifta and contemporary Sunni fiqh councils (trading vs investment intent)
  • Office of Grand Ayatollah Sayyid Ali al-Sistani (Ja'fari zakat categories and khums on annual surplus)

Frequently asked

How much zakat do I pay on stocks?

Under the majority Sunni view, 2.5% once per lunar year: on the full market value if you bought the shares to trade, or on the zakatable portion of the company's assets if you hold them long-term. Under the Ja'fari school followed by Ayatollah Sistani, shares carry no zakat; instead khums (one-fifth of your yearly surplus) applies.

Do I pay zakat on shares I hold long-term for dividends?

In the Sunni view, yes, but only on the zakatable assets (cash, receivables, inventory) behind your shares, at 2.5%, plus any dividends you received. Some councils allow paying 2.5% on roughly a quarter to a third of market value as a simplification, or on the full value to be cautious.

What is the Shia ruling on zakat for stocks?

In the Ja'fari school followed by Grand Ayatollah Sayyid Ali al-Sistani, zakat applies only to nine specific items that do not include shares, so shares themselves are not subject to zakat. The annual obligation on investment wealth is khums: one-fifth of the surplus remaining at your khums anniversary. Refer to your own marja for how to apply it.

Is zakat the same as purification of dividends?

No. Zakat (or khums) is an annual obligation on your wealth or surplus. Purification is a separate step that gives away the small share of investment income that came from non-permissible sources such as interest. You calculate and pay them separately.