Paying Zakat vs. Paying Off a Debt

Answered by Shaykh Faraz A. Khan

Question: I have some jewellery which meets the nisab of zakat. However, I also have a credit line loan. Last year, when I calculated the zakat on jewelry it came out to be around $800.

My credit line loan is $7,000. Am I obligated to give the $800 in zakat or can I pay it towards my loan?

Answer: Assalamu alaikum wa rahmatullah,

I pray this finds you in the best of health and states.

Firstly, keep in mind that for zakat, zakat is not due on all jewelry, but just one’s gold and silver. Also, to see if you meet nisab, you need to add the value of the gold and silver to your cash (as well as trade assets if you own a business).

With respect to your credit line loan, if this is a short-term debt (i.e., due within a year), then you would deduct that entire amount before seeing if you have nisab or not.

If it is a long-term debt (due after one year), then you would deduct the upcoming monthly installment, or at most up to one year. Aside from that amount, you would see if the rest met nisab or not to see if you owe zakat.

Please see related answers on SeekersGuidance, such as:

Zakat & Long-Term Debts

How to Calculate Zakat When Paying or Receiving Loan Payments

Paying Zakat on Gold, Loans, and Gifts

Zakat Questions: Resetting Start Date, Miscalculations, and Debt Deduction

[Kasani, Bada`i al-Sana`i; Ibn Abidin, Radd al-Muhtar]

And Allah knows best.
wassalam
Faraz

Checked & Approved by Faraz Rabbani