Zakah on Stocks: A Comparative Analysis of Long-Term and Short-Term Investments

Abstract

This paper explores the zakah treatment of stock investments, with a particular focus on the distinction between short-term and long-term holdings. As stock ownership becomes increasingly common among Muslim investors, understanding its zakah implications is essential to ensure compliance with Islamic obligations. The study investigates the influence of investment intention on zakah liability, reviewing both classical jurisprudential positions and contemporary scholarly interpretations. It outlines key differences in zakah calculation for trading stocks—typically subject to zakah on full market value—and long-term investments, which may only be zakatable on specific underlying assets like cash or inventory. The paper presents a comprehensive framework for calculating zakah, incorporating principles of Islamic finance, modern financial instruments, and detailed investor models. It also compares the views of the four major Sunni schools of thought and institutional bodies such as AAOIFI and the Islamic Fiqh Academy. Practical recommendations are offered for both individual investors and financial institutions, along with future research directions aimed at addressing zakah challenges in emerging financial sectors like digital assets and Islamic fintech platforms. The study aims to bridge the gap between classical zakah principles and modern investment realities, empowering Muslim investors to fulfil their religious duties with clarity and confidence.