Q: How do I calculate Zakat on shares?
A: If you are holding these shares as a long-term investment then Zakat is due on your proportionate ownership of the Zakatable assets of the companies in which you have invested. Normally this is done by finding out which stocks you own, how many shares you own and then using the company balance sheets to work out roughly what the Zakatable assets are in each firm. If it is difficult for you to determine this then simply take 25% of the current market value of your portfolio as a proxy for the Zakatable assets of the underlying companies and then pay 2.5% of this value.
e.g. if your portfolio is worth £10,000, take 25% which is £2,500 and then 2.5% of this which would be £62.50.
The increase and decrease in portfolio value is irrelevant – only the current value matters.
And Allah knows best!
Mufti Faraz Adam