I have few investment property and have no mortgage on this property. I have rental income and paying zakat only on net saving of rental income. I could not find any Hadith ( only Fatwa ) to justify that what I am doing is correct. Meaning paying zakat on net rental income not on value of property. Can you please tell me is there any hadith on this subject and please your view how scholar came to conclusion (Fatwa) that zakat to be paid only on net rental income not on value of property. Thanks You Arif Makda 11/5/07 amakda@aol.com

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger.

It is an obligation to pay Zakat on the estates which are set for trade according to the market price if it reaches the Nisaab (i.e. the minimum amount liable for Zakat) by itself or when added to other money or tradable items and if a whole lunar year elapses on it.

However, it is not an obligation to pay Zakat on the estates which are prepared for renting; Zakat must be paid only on its profit provided it reaches the Nisaab and a whole lunar year elapses on it. This also applies to all cash you possess. The evidence about this is the saying of the Prophet said: “A Muslim is not obliged to pay Zakat on his slave or his horse.”

Moreover, An-Nawawi said: “This narration is evidence that there is no Zakat on the money [wealth] from which a person benefits and which are not prepared for trade, it also proves that there is no Zakat on slaves and horses if they are not prepared for trade. This is the view of the entire contemporary and former scholars .”

Finally, Ibn Habeerah reported that there is a consensus of the scholars on this issue.

For more benefit, please refer to Fataawa 83900 and 85524.