How to Calculate Zakat on Equity, Stocks, and Mutual Funds

Assalamu Alaikum.

Many Muslims today hold shares, stocks, or mutual funds as part of their wealth. This guide explains how to calculate Zakat on such investments using two approaches accepted by contemporary scholars:

1. The simplified rule favoured by most Ulema
2. The more precise manual method (company-by-company analysis)

1. The Rule Accepted by Most Scholars: 25% of Value, Then 2.5%

Most contemporary Islamic scholars—including major fiqh councils—permit a simplified approach for calculating Zakat on equity investments:

1. Take 25% of the total current market value of your shares, stocks, or mutual funds.
2. Then pay 2.5% Zakat on that 25% portion.

This treats one-quarter of your portfolio as the zakatable component, representing a conservative estimate of the liquid and tradeable assets of the companies you own.