Paying Zakah on rented gold

I have handed over a certain quantity of gold to a jeweller friend who in turn pays me rental value of my gold stock  price of a masha (less than a gram) against one tola (12 grams) on monthly basis. The amount earned from there is being spent on my children education. Is zakat due on earned amount or to be paid on complete gold deposit.

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger.

If the gold that you rent out is not manufactured gold, then Zakah must be paid on it if it reaches the Nisaab (minimum value for Zakah). But if the gold is an ornament (jewelry that is worn for adornment), then there is a difference of opinion among the scholars about the obligation of paying Zakah on it.

The Hanafi School is of the view that it is an obligation to pay Zakah whatever the case (whatever the use of the gold), and the Hanbali School is of the view that it an obligation to pay Zakah on the jewelry that is intended to rent out, whereas the Shaafi‘i and Maaliki Schools are of the view that it is not an obligation to pay Zakah on this kind of gold.

However, it is better to pay Zakah on this gold whatever the case in order to be on the safe side, if it reaches the Nisaab, which is what is equal to approximately eighty-five grams of pure gold.

As regards the earnings from renting out this gold, if you spend it on your family before a whole lunar year passes, then there is no Zakah on it; but if you save the money that you get from renting it out for an entire lunar year, then you are obliged to pay Zakah on each installment from this rent when a whole lunar year passes while it (the installment) is in your possession if the original amount reaches the Nisaab. This means that they (the installments) follow the original amount of the rented gold regarding the Nisaab and not regarding the passing of the year.

Some scholars are of the view that the Zakah on the money from the rent is paid according to the Zakah of the original property in all cases, so if a whole lunar year elapses on the rented jewelry, you should consider the money that you have in your possession and pay the Zakah on the total amount of money. This is the easiest manner in calculating the Zakah and it is to the greater interest of the poor and needy, so it is the safest method.

For more benefit, please refer to Fatwa 92234.

Allaah Knows best.