Zakat on mutual funds and shares in India is paid at 2.5 per cent of their market value on your zakat date if you hold them for sale or growth, and the IndiaZakat.com FAQ adds a second, older method for long-term holdings that taxes only the dividend yield at 10 per cent. Zakat on EPF is due once the money is yours to withdraw: the Deoband answer republished on IndiaZakat says a person who is already above nisab pays on the provident fund at their next zakat date without a separate year. The nisab test uses 87.48 grams of gold or 612.35 grams of silver at today's price, whichever is lower. The zakat hub covers the basics; this page works through the three asset types salaried Muslims ask about most.
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Start with the nisab test at today's price, not a quoted figure
Nisab is the minimum wealth below which zakat is not due. IndiaZakat's zakat principles page states the thresholds as 7.5 tolas of gold, which it converts to 87.479 grams, and 52.5 tolas of silver, which it converts to 612.35 grams. The rupee value of each moves with the bullion price every day, so any figure printed in an article is stale within a week. IndiaZakat's own page quotes a Mumbai gold price from 26 March 2020 to illustrate the method and then tells readers to check the applicable nisab on their zakat due date. Follow that advice: look up the per-gram price of 24-carat gold and of silver on the day, multiply, and compare.
The same FAQ explains why the silver figure usually decides the question in India. Because silver is far cheaper per gram, the silver nisab in rupees is a small fraction of the gold nisab, and IndiaZakat's example has a person with Rs 1,20,000 of net wealth paying zakat because he exceeds the silver threshold even though he is below the gold one. The page recommends taking the lower of the two values because it benefits the poor. Most Indian scholars follow that view, which means almost anyone with mutual fund units and a few months of savings is above nisab. Our zakat calculation guide for India covers hawl, the lunar year, and how to fix a zakat due date.
Zakat on mutual fund units: the two methods and which to use
The method most contemporary scholars and most zakat calculators use treats a mutual fund unit as a share in a pool of zakatable assets and charges 2.5 per cent on the market value of the units on the zakat date. For an open-ended fund that value is the published NAV multiplied by units held. Tata Mutual Fund, for example, publishes the Tata Ethical Fund NAV daily on its site (Rs 395.39 for the direct growth plan on 5 October 2026), so the calculation is NAV times units, less nothing, times 2.5 per cent. Growth-option units are treated the same as dividend-option units because the gain is embedded in the NAV.
IndiaZakat's FAQ page takes a different line for long-term holdings. Its worked example, Bakar, has held dividend-option mutual funds for five years whose value rose from Rs 4 lakh to Rs 5 lakh. The answer given is that the dividend is zakatable each year at 10 per cent, by analogy with the produce of land, and that zakat is not payable on the market value of the units because they are not held for routine buying and selling. The same page applies 10 per cent to bonus shares. This is a minority position among contemporary scholars and it produces a much smaller liability for a growth investor, so you should not adopt it without a scholar you trust confirming it applies to you.
| Method | What is zakatable | Rate | Who uses it | Effect on a Rs 5 lakh growth fund |
|---|---|---|---|---|
| Market value method | NAV times units on zakat date | 2.5% | Most contemporary scholars, most calculators | Rs 12,500 a year |
| Underlying assets method | Your share of the fund's cash, receivables and stock in trade | 2.5% | Scholars who treat shares as business partnerships | Less than Rs 12,500, needs fund balance sheet data |
| Yield method (IndiaZakat FAQ) | Dividend received, bonus units | 10% | A minority view by analogy with land produce | Nil in a growth plan with no dividend |
Our recommendation is the market value method for anyone holding Tata Ethical, Taurus Ethical, Quantum Ethical or Shariah BeES through a SIP, because the purpose is capital growth and the units can be redeemed any business day. The underlying assets method is defensible but needs data the AMCs do not publish in a usable form. Whatever you choose, use it consistently from year to year and do not switch to whichever gives the lower figure.
Zakat on listed shares: trading versus long-term holding
For shares bought to sell, the position is settled. IndiaZakat's FAQ answers a trader who has been buying and selling shares with a profit six months ago: zakat has to be paid on items of trade, so it is due on the market value of the shares on the zakat due date. Market value means the closing price on your zakat date multiplied by the number of shares, and brokerage apps show that figure on the holdings screen. There is no deduction for the purchase price or for unrealised losses.
For shares held long term for dividends and growth, the same split appears as for mutual funds. The market value method charges 2.5 per cent on the holding. The underlying assets method charges 2.5 per cent on your proportionate share of the company's zakatable assets, which is where the published balance sheet ratios in a screening app become useful. The IndiaZakat yield method charges 10 per cent on dividends and bonus shares only. If you hold a Shariah-screened portfolio through an app that reports a zakat figure, check which method the app applies before you trust the number. Remember too that zakat and purification are separate obligations; our guide to dividend purification for Indian investors covers the second.
- Shares bought to resell within the year are zakatable at 2.5 per cent of market value on the zakat date, with no dispute among the sources we read.
- Shares held for growth are zakatable at 2.5 per cent of market value under the method most calculators use, or on the underlying zakatable assets under the partnership view.
- Dividends received during the year are cash by the zakat date and are counted with your bank balance under the market value method.
- Bonus shares are simply more shares under the market value method; IndiaZakat's FAQ instead charges 10 per cent on their value when received.
- Shares pledged as collateral are still yours and still zakatable; the loan against them is a liability you may deduct.
Zakat on EPF: when the balance becomes yours
The Employees' Provident Fund raises a question that shares do not: is the balance yours while it sits with the EPFO? The EPFO's FAQ describes a fund you cannot freely access during employment, with non-refundable advances for housing and withdrawal on leaving service or retirement, and an account that becomes inoperative 36 months after retirement at 55 or later. Most Indian muftis treat the balance as outside your possession until it is received or becomes withdrawable, and IndiaZakat republishes a Deoband answer to that effect: zakat is obligatory on receipt of the accumulated amount, and not before.
The follow-on question is whether a fresh year must pass after withdrawal. IndiaZakat's question 34 answers it directly: if you are already sahib-e-nisab, you pay zakat on the provident fund at your next zakat date, and it is not necessary for a separate year to complete on the PF money. In practice, then, an employee pays nothing on the EPF balance during service, and a person who withdraws Rs 16 lakh on leaving a job adds it to the zakat base for the next due date. A minority of scholars prefer paying each year on the accessible portion as a precaution; if you follow that view, pay on the employee contribution plus the employer contribution that has vested, and leave the interest out because it is to be purified rather than owned. Our analysis of whether EPF interest is halal explains that last point.
The PPF is a voluntary account, so the possession argument is weaker. IndiaZakat's FAQ includes the case of Kareem, who contributed Rs 11.2 lakh over 15 years and received Rs 16 lakh at maturity, and the answer treats the maturity amount as zakatable on receipt. Many scholars would instead say the PPF balance was always accessible in principle, through partial withdrawal rules, and should have been counted each year. Whichever you adopt, the interest component is not yours to keep and should not be counted as wealth; it should be given away without expecting reward. Our guide to whether PPF is halal sets out the fatwa positions.
A worked example for a salaried investor in Bengaluru
Take a software engineer whose zakat date is 1 Ramadan. On that date she holds 2,500 units of Tata Ethical Fund direct growth at an NAV of Rs 395.39, which is Rs 9,88,475; shares in six screened companies worth Rs 3,20,000 at the day's close; Rs 1,80,000 in a current account; and an EPF balance of Rs 7,50,000 that she cannot withdraw. She owes Rs 40,000 on a credit card bill due next week. Under the market value method her zakatable base is Rs 9,88,475 plus Rs 3,20,000 plus Rs 1,80,000, less the Rs 40,000 liability, which is Rs 14,48,475. Zakat at 2.5 per cent is Rs 36,212. The EPF is left out until she can withdraw it.
If she followed IndiaZakat's yield method for the fund and the long-term shares, her base would fall to the current account and any dividends received, and the figure would be a fraction of that. The gap between the two methods is the reason to settle the question with a scholar once and then apply the same rule every year. The zakat calculator and tools page lets you run the market value method on your own numbers.
Where to pay it: IndiaZakat and Zakat Foundation of India
Once the figure is known, the Indian investor has two institutional routes that publish how zakat is deployed. IndiaZakat is a crowdfunding platform run by the Association of Muslim Professionals from Byculla, Mumbai, and its homepage lists verified individual causes in education, medical treatment, livelihood, disaster relief and orphan support with a running total against each. The site states that the full amount is disbursed and that causes are verified. Zakat Foundation of India runs institutional programmes from New Delhi, including orphanages, scholarships and medical services, and holds the 12A, 80G and FCRA registrations that matter if you want a receipt. Our profiles of the IndiaZakat platform and the Foundation go through their models.
A caution from IndiaZakat's own questions page: zakat should not be given to institutions that use it for construction, investment or salaries rather than passing possession to the eligible recipients. Ask any charity how the zakat portion is ring-fenced from general donations before you transfer.
Our view: the decision for each type of holder
A SIP investor in any Shariah fund should pay 2.5 per cent of NAV times units on their zakat date and ignore the yield method unless a scholar they follow explicitly endorses it. A direct equity investor should do the same on the closing value of the portfolio, deducting any margin or loan against shares, and treat purification as a separate line. A salaried employee should leave the EPF out until withdrawal, note the Deoband position that no separate year is needed once the money arrives, and plan the zakat payment for the first due date after leaving a job. Anyone with PPF should at minimum pay on the maturity amount excluding interest and preferably count the balance each year. Keep the gold and jewellery question separate; our guide to zakat on gold jewellery in India handles it.
Facts checked against indiazakat.com, zakatindia.org, epfindia.gov.in, tatamutualfund.com on 29 September 2026.
Frequently asked questions
How do I calculate zakat on mutual funds in India?
Multiply the units you hold by the NAV published by the AMC on your zakat date and pay 2.5 per cent of that value, after deducting debts due within the year. This is the market value method used by most scholars and calculators. IndiaZakat's FAQ describes an alternative for long-term holdings that charges 10 per cent on dividends only, but it is a minority view.
Is zakat payable on EPF balance every year?
Under the view IndiaZakat republishes from Deoband, no: zakat on the provident fund becomes obligatory when the accumulated amount is received, and a person already above nisab pays on it at their next zakat date without waiting a further year. Some scholars prefer annual payment on the accessible portion as a precaution, excluding the interest.
What is the nisab for zakat in India in rupees?
There is no fixed rupee figure. IndiaZakat states the thresholds as 87.48 grams of gold or 612.35 grams of silver, and the rupee value is the day's bullion price multiplied by those weights. Most Indian scholars use the lower silver value, which keeps nearly every investor above nisab. Check the price on your zakat date rather than relying on a published number.
Do I pay zakat on shares I hold for the long term?
Under the market value method, yes, at 2.5 per cent of the closing value on your zakat date. Under the partnership view you pay on your share of the company's zakatable assets. IndiaZakat's FAQ applies 10 per cent to dividends and bonus shares only for long-term holdings. Shares bought to resell are zakatable at full market value under every view.
Can I deduct my home loan or credit card bill before calculating zakat?
Debts due within the coming year are deducted from the zakatable base under most views; IndiaZakat's trader formula explicitly subtracts loans and advances payable. A long-term home loan is usually deducted only for the instalments due in the year, not the full principal, and in any case it should not be an interest-bearing loan if it can be avoided.
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Is zakat the same as dividend purification?
No. Zakat is 2.5 per cent of your zakatable wealth paid to eligible recipients once a year. Purification is giving away the share of a company's income that came from interest or non-compliant business, calculated per holding and paid whenever dividends or sale proceeds arrive. A Shariah investor in India owes both, and they are calculated separately.
