Is Zakat Required on Money Lent to a Needy Person?

Yes, Zakat is required on money loaned to a needy person.

When it comes to money that has been lent to a needy person, the rule can be somewhat nuanced:

• Zakat on Loaned Money:
• Zakat is due on loaned money, even if it hasn't been repaid by the end of the year.
• The loan remains part of your wealth, so if it is outstanding, Zakat is payable on it.
• Paying Zakat Before Repayment:
• You may choose to pay Zakat on the loaned amount before it is repaid.
• If you pay Zakat early, it counts for that year.
• Paying Zakat After Receiving Repayment:
• If you don’t pay Zakat until the loan is repaid, you must pay Zakat for each year the loan remains outstanding.
• This means calculating Zakat and paying it for every year the money was loaned and not returned.
• Bad Debts:
• If the borrower is unable to repay the loan, and it becomes a bad debt, Zakat is no longer due on that amount.
• The debt must be expected to be repaid for Zakat to be applicable.

This obligation serves as a reminder to manage wealth responsibly and fulfill the duties of charity prescribed in Islam.

And Allah knows best!