Assalaamualaikum Sheikh Sajid. I pray you well. I usually pay my zakah in Ramadaan and am confused regarding the zakaah of my shares.
باسم الله والحمد لله والصلاة والسلام على رسول الله وعلى آله وأصحابه ومن والاه
Wa’alaykumus Salaam dear brother. May Allah Almighty reward you for choosing the path of seeking knowledge and trying your best to worship Allah Almighty correctly.
The topic you have asked has been discussed in detail between the scholars (May Allah Almighty preserve them) and the details of their discussion is beyond the scope of this reply.
In summary however; the following applies:
Shares are purchased for different reasons with the two most common reasons being:
1. For the purpose of trade and…
2. For the purpose of investment.
The reason behind one’s purchase of a share dictates how one’s zakaah will be calculated and paid. This is as follows:
If a person purchased the shares with the intention of investment and not trade; the shares will be considered and counted as similar to a property or amenity that is rented out. Based on this analogy, zakaah will be calculated when zakah is due (after a lunar year) based only on the profit generated by the share without taking into consideration the value of the share that generated the share’s profit. This is similar to how a person would pay zakah on the rental income generated after a year without taking into consideration the value of the amenity that was a means of the rental income generation.
However, if the shares were purchased with the intention of trade; the shares shall then be considered and counted as similar to tradeable merchandise, and thus zakaah will be calculated when zakah is due (after a lunar year) based on the market price of the shares in hand.
I pray the above citation helps clarify that which is expected of you. If you require further clarification, please do not hesitate to write in.
And Allah knows best.