Equity is the natural home of halal investing: buying a share makes you a part-owner of a business, sharing in its profits and losses, which is exactly the risk-sharing structure Islamic finance prefers over lending. But part-ownership cuts both ways. If the business earns haram income or is built on interest-bearing debt, you own a slice of that too. The screening framework below is how scholars worldwide, and TASIS in India specifically, decide which companies pass. It has two layers plus a cleanup step, and once you understand it, every halal fund, index and app in India becomes legible. Thresholds verified against the NSE Indices methodology document (August 2026) and provider pages on 2026-08-06.
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Layer one: the business screen
First question: what does the company actually do? Excluded outright under TASIS's screens are conventional financial services (banks, insurers, brokers and NBFCs built on interest), alcohol, tobacco, pork and non-halal food production, vulgar entertainment, hotels and restaurants serving non-permissible products, gambling and narcotics. This is why no Indian bank stock appears in any Shariah index, and why screening the Nifty 50 leaves only 17 compliant names: India's benchmark is heavy with financials, and the business screen removes them all.
The hard cases are mixed businesses. A retailer that earns some revenue from liquor sales, a conglomerate with a lending subsidiary, a hotel chain: these are judged by how much of the business is impermissible, which flows into the ratio tests below. Different standards draw the line differently, and honest screeners like Zoya maintain a questionable category for exactly these cases rather than forcing a binary verdict.
Layer two: the financial ratios
A permissible business can still fail on its balance sheet. The ratio screens exist because almost every listed company holds some interest-bearing debt and earns some interest on deposits; the question is how much is tolerable before ownership becomes participation in riba. TASIS, whose screens define NSE's Shariah indices and therefore the practical halal universe in India, applies three tests: interest-based debt must be at or below 25% of total assets; interest income must be at or below 2.5% of total income; and receivables plus cash and bank balances must be at or below 90% of total assets. That last test, less discussed, ensures the company's value rests on real assets and operations rather than financial claims.
Global standards are looser. AAOIFI-style screens, used by Islamicly, Musaffa and Zoya, typically cap non-permissible income at 5% of revenue and interest-bearing debt and securities at around 30%, sometimes measured against market capitalisation rather than assets. ShariahCap Advisors, whose data appears in the IFN Annual Guide 2026, applies a 25% debt-to-assets cap with an interest-income threshold revised from 4% to 3% for BSE screening. The practical consequence: a stock near the thresholds can be halal under one standard and not another. Pick a standard, understand it, and stay consistent.
How many Indian stocks pass
More than you might expect, and the share is rising. Per ShariahCap data published in the IFN Annual Guide 2026, 2,307 of 5,212 BSE-listed stocks were Shariah-compliant in 2025, which is 44%, up from 26% in 2021. TASIS's own site prints 1,908 compliant companies of 5,908 screened, roughly one in three; the difference between the two counts is methodology, which is itself a lesson. Either way, the compliant universe is thousands of stocks deep. What it lacks is sector balance: with financials gone, IT, pharma, consumer goods and manufacturing dominate, a concentration effect we cover in a dedicated guide.
The cleanup step: purification
Even a compliant company earns slivers of impure income: interest on its cash deposits, mostly. That sliver reaches you through dividends, and it must be purified: calculated and given to charity without intention of reward. TASIS defines an Income Purification Ratio for exactly this, screening apps compute it per holding, and Tata Ethical Fund publishes prohibited income per unit for its investors. Purification is not optional in TASIS's stated position: purging is mandatory. Our purification guide covers the mechanics for stocks and funds.
What screening does not cover
Three honest boundaries. First, screening is point-in-time: a compliant company can leverage up or launch a lending arm next quarter, which is why serious platforms re-screen continuously and issue compliance-change alerts with exit windows. Second, screening says nothing about how you trade: intraday speculation, derivatives, and buying on margin raise separate Shariah problems no stock screen fixes; India's classic Islamic broking mandate (the Bonanza-Pragmatic PMS of the early 2010s) prohibited day trading outright. Third, in India nobody audits the screeners: SEBI has no Shariah framework, so every verdict is private research. That is not a reason to distrust the tools; it is a reason to prefer platforms whose governance is named and checkable, and to verify certifications on the certifier's own site where possible, as we do throughout this site.
A worked decision process
Putting it together, here is the decision process for any Indian stock: Is the core business permissible? If no, stop. If mixed, does impermissible revenue stay within your standard's threshold? Then the ratios: interest-bearing debt, interest income, and the liquidity test, against TASIS's 25/2.5/90 or your chosen standard's equivalents. Then ongoing monitoring through a screener with alerts (IslamicTijarat for TASIS alignment, Musaffa or Islamicly for AAOIFI-based coverage). Then annual purification of the impure sliver in your dividends. Or skip the whole process and hold a screened fund or the Shariah BeES ETF, where the index does the screening monthly. Both routes are legitimate; the difference is who does the work. Verified 2026-08-06.
A worked example, start to finish
Take a hypothetical Indian manufacturer, Company X, to make the machinery concrete. Business screen: it makes industrial equipment, nothing excluded; pass. Now the ratios from its latest annual figures. Interest-bearing debt of Rs 400 crore against total assets of Rs 2,000 crore is 20%: under TASIS's 25% cap, pass. Interest income of Rs 30 crore against total income of Rs 1,100 crore is 2.7%: over TASIS's 2.5% cap, fail; but under an AAOIFI-style 5% cap, pass. Receivables plus cash of Rs 1,500 crore against Rs 2,000 crore of assets is 75%: under the 90% cap, pass. Verdict: non-compliant under TASIS, compliant under AAOIFI-style screens, which is exactly the boundary-case disagreement our screening app comparison describes, and exactly why you pick one standard and stay consistent. If you hold it under the permissive standard, the purification arithmetic follows: 2.7% of any dividend received is impure and gets donated. Numbers invented for illustration; the method is the real content.
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Frequently asked questions
Are IPOs screened? Yes, by the same tests applied to the prospectus financials; IslamicTijarat runs a dedicated TASIS-supervised IPO screener for Indian listings, useful because IPO-stage companies often carry unusual balance sheets. Does a compliant company's stock become haram the day a ratio slips? Standards handle transitions differently; the practical norm is an exit window after confirmed non-compliance, which is why alert-and-cutoff features matter in an app. Are bonus shares and splits a problem? No; they change unit counts, not the underlying business or your ownership nature. What about companies with no debt but huge cash piles? The receivables-plus-cash test (90% under TASIS) and the interest-income test catch balance sheets that have become money warehouses; a debt-free company can still fail on the interest its treasury earns. Is short selling halal if the stock is? Mainstream opinion prohibits selling what you do not own regardless of the stock's compliance; screening governs what you may own, and our broker guide covers the trading-practice rules that govern how. Verified 2026-08-06.