There are diverse opinions on this matter:
The first opinion is that the principal building or the leased property itself is not subject to Zakat. Instead, Zakat is due on the income received from the rent. The Zakat for the lessor is to add the rental income to their overall wealth and pay 2.5% of the total wealth after deducting any outstanding debts and essential needs, provided that the wealth reaches the Nisab threshold.
We can say that this is the most widely spread opinion among scholars and jurists.
The second opinion is that Zakat should be paid on both the property itself and the rental income. For example, if someone’s apartment is worth a hundred thousand, and they receive ten thousand in rent, their total wealth becomes a hundred and ten thousand. They can deduct any outstanding debts and essential needs and pay 2.5% Zakat on the remaining amount.
This opinion is the choice of some Hanbali scholars. They based this on the analogy with the rental of jewelry. They said: The original ruling concerning jewelry that a woman owns for adornment is that it is not subject to Zakat. However, when a woman rents it out, its nature changes from being adornment to being a form of trade and a means of acquiring profit. Consequently, it becomes Zakatable similar to other stored wealth. Therefore, its Zakat and the Zakat of its rental value are due.
Likewise, an apartment is not subject to Zakat if it is for personal use. However, if it transitions to being a source of income, it moves into the realm of commerce and all become Zakatable.
The third opinion is based on the principle of analogical reasoning and similarity in attributes. It considers that the apartment, in this case, is neither bought nor sold, and it is not a commercial offering. Rather, it is a fixed property from which utility is derived. From this perspective, it is considered private property, and personal properties that are consumed by the owner’s needs are not subject to Zakat, like a residential house, a car, clothing, and others. However, from another perspective, if it is used for purposes other than personal ownership and starts generating income.
Therefore, proponents of this opinion have likened this situation to agricultural lands. Just as land is not inherently for sale or purchase, yet it generates income through cultivation, an apartment is not primarily for buying or selling, but it generates income through rent.
Therefore, the Zakat for this type (rental income) is calculated similar to the Zakat on agricultural land, and it is paid on the yield (rental income) exclusively.
It can be calculated in two ways:
Either five percent of the rental income for those who have expenses for the upkeep of the leased property, or ten percent for those who have no such expenses.
Expenses include maintenance work, administrative costs, property taxes, and other deductions that are typically made. So, the person giving Zakat would pay five percent of the rental income if there are such expenses, and if there are no expenses of that sort, they would pay ten percent.
This opinion is held by respected scholars such as Muhammad Abu Zahra, Sheikh Khallaf, Dr. Abdul Rahman Hasan, and Dr. Al-Qaradawi, and it is the opinion we issue fatwas based upon.
It is worth mentioning that it is permissible to pay this Zakat monthly or annually, as it is linked to the collection and receipt of the rental income. The concept of the Islamic financial year (Hawl) does not apply to it, given the principle of analogy.
Fatwa by Dr. Khālid Naṣr