Zakat on Child’s Wealth and Investing in Stocks

In principle, Zakat is not due on a minor. Therefore, there is no Zakat due on the gold and cash belonging to your daughter.[i]

There are differences of opinion among senior and reputable Ulama regarding the permissibility of investing in the stock market. Mufti TaqiUthmaniSahib MaddaZilluhu has deemed investing in stocks permissible with the following conditions:[ii]

1) The main business of the company is not in violation of Shariah.It is not permissible to acquire the shares of the companies providing financial services on interest, like conventional banks, insurance companies, or the companies involved in some other business not approved by the Shariah, such as the companies manufacturing, selling or offering liquors, pork, haram meat, or involved in gambling, night club activities etc.

2) If the main business of the companies is halal, like automobiles, textile, etc. but they deposit their surplus amounts in an interest-bearing account or borrow money on interest, the shareholder must express his disapproval against such dealings, preferably by raising his voice against such activities in the annual general meeting of the company.

3) If some income from interest-bearing accounts is included in the income of the company, the proportion of such income should be given in charity and must not be retained by him. For example, if 4% of the whole income of a company is accrued from interest-bearing deposits, then 4% of the dividend should be given in charity.

4) The shares of a company can be purchased only if the company owns some non-liquid assets. If all the assets of a company are in liquid form, i.e. in the form of money, then that cannot be purchased or sold, except on par value, because in this case the share represents money only and the money cannot be traded in except at par value.

If one engages in trading, then it is necessary to ensure that the delivery of the stock has been made before selling it off to another buyer. He cannot sell without taking possession of the share.[iii]

If the above requirements are met, you may invest in companies through the stock market. It is a well known principle and practice among the Fuqaha that when there areacademic differences among the scholars on an issue, that createsflexibility in the issue. Therefore, investing in the stock market will be permissible. Abstaining from investing in the stock market will be acting onTaqwa