Property and Business Assets in Zakat
Property and business assets are zakatable if they are held for profit. Your main home and personal belongings are exempt.
Your Main Home Is Exempt
You do not pay Zakat on the home you live in.
If you own a house or flat that you live in, it is not zakatable. This is true even if the property is worth millions. Islam does not ask you to pay Zakat on personal use items, and your home is a basic need, not surplus wealth.
However, if you own a second property that you rent out or plan to sell, different rules apply. The property itself may or may not be zakatable, depending on your intention when you bought it.
Rental Property
The property is exempt
but rental income is zakatable.
If you bought a property to rent out and hold long-term, the property itself is not zakatable. However, the rental income you receive and save is zakatable. On your Zakat date, include any rental income you have saved for a full year.
If you bought a property specifically to sell for profit (like a property developer or house flipper), the property is treated as business inventory. In this case, the full market value is zakatable.
Keep Business and Personal Separate
When calculating Zakat, add both your personal wealth (savings, gold) and your business wealth (cash, inventory). Then apply 2.5% to the combined total.
Sole Traders and Companies
Whether you are a sole trader, partnership, or limited company, the Zakat rules are the same: cash and inventory are zakatable, fixed assets are not.