By Sayyid Muhammad Rizvi (Toronto, Canada)
Zakat On Currency
The Sunni schools of Islamic law believe that zakat is wajib on any kind of gold and silver, whereas the Shi‘a school believes that zakat is wajib on gold and silver only if they are in form of coins.
As for currencies, three of the four Sunni schools say that it is wajib to pay zakat on currencies provided they reaches to the minimum value (equivalent to 4.8 grams of gold) and provided they were under one’s continuous possession for a year.
The fourth Sunni school (Hanbali) believes that it is not wajib to pay zakat on currencies unless one converts them into gold or silver.11 This position is closest to the Shi‘a position that believes that zakat on currencies will become wajib only when one converts them into gold or silver coins.
The Shi‘a school believes that it is not wajib to pay zakat on currencies. There is a very logical
explanation for why zakat is not wajib in currencies:
1) If a person says that “the currencies or bank notes represent the gold or silver coins that are in the government’s treasury,” we would still say that zakat is not wajib on them. Why? Because a person who possesses the currencies does not possess the gold or silver coins, he just possesses the right to ask the government for gold or silver coins. For zakat to become wajib, one must possess the actual coins for a whole year.
2) If a person says, “the currencies or bank notes represent the gold or silver ingots that are in the government’s treasury,” we would still say that zakat is not wajib on them. Why? Zakat becomes wajib on silver and gold only in form of coins.
3) If a person says that “the currencies or bank notes are like promissory notes that prove the
indebtedness of the government to that person for certain number of gold or silver coins that are in its treasury,” we would still say that zakat is not wajib on them. Why? What a person has given to someone else as loan is not deemed to be in his possession and therefore it is not liable for zakat.
Moreover, there was a time when the value of US dollar, the main paper currency of our time, was fixed to an ounce of gold based on the gold reserves in the US Federal Reserve. But the costly Vietnam War drained US gold reserves and so, in August 1971, Nixon broke the Bretton Woods agreement, and refused to redeem dollars for gold since he had not enough gold to give.
The US dollar is now fixed only to the printing press of the Treasury and Federal Reserve.
I hope this clarifies the issue of zakat in the Qur’an and the way the Shi‘as have believed in it.
