AAOIFI Shari'a screening · Reviewed May 17, 2026

How to purify dividends (AAOIFI method)

Step-by-step purification of dividends and capital gains under AAOIFI Shari'a Standard No. 21 — formula, worked example, and how to track it.

Purification means giving away the portion of investment income that comes from non-permissible sources — typically interest earned on the company's cash reserves. Under AAOIFI Shari'a Standard No. 21, the amount equals the non-permissible-income ratio multiplied by your dividends plus realized capital gains. Give it to charity (not yourself).

Step 1: Find the company's non-permissible-income ratio (interest income / total revenue). For most large tech companies this is 0.5%–2%. HalalScreener publishes this ratio for every stock it tracks.

Step 2: Sum your dividends received and realized capital gains for the period (typically annual).

Step 3: Multiply: purification owed = ratio × (dividends + realized gains). Worked example — $10,000 dividends + $5,000 gains on a stock with 1.6% non-permissible income → $15,000 × 0.016 = $240 purification owed.

Step 4: Give the purification amount to charity. It is not deductible as personal zakat — it is a separate religious obligation tied to the non-permissible portion of your investment income.

AAOIFI does not require purifying unrealized gains. The obligation is triggered when income is actually received (dividends) or realized (sale of shares).

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. 21 — Financial Papers (Shares and Bonds)
  • Wahed Invest purification policy
  • Amana Mutual Funds (Saturna) — quarterly purification disclosures

Frequently asked

Do I owe purification on unrealized gains?

No. AAOIFI Shari'a Standard No. 21 triggers purification when income is actually received (dividends) or realized (sale of shares). Unrealized gains are not purified until they are sold.

How do I find the non-permissible-income ratio for a stock?

It is the company's interest income divided by its total revenue. HalalScreener publishes this ratio on every stock page along with the AAOIFI compliance grade.

Can I deduct purification from my zakat?

No. Purification is a separate religious obligation from zakat. Zakat applies to wealth above the nisab threshold; purification applies specifically to the non-permissible portion of investment income.