Question:

I have purchased two plots. What is rule for paying Zakat on these plots? Should I pay Zakah on these plots or not? Initially I was paying Zakat on these plots but now I have discontinued it as I read that there is no Zakat on plots if plots purchased for self-use and not with the intention of selling? What will happen if I change my mind and sell these plots if I got better offer in future? At present, I have no intention for selling these plots. What happens if one person purchased plots for investment of his cash etc. and set his mind for not selling but actually he made investment of his money which ultimately transforms into to selling of plots?

Fatwa:

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

As long as the nature of the plots is as you mentioned, then Zakat is not due on them. Instead, you have to pay Zakat on their price after selling them if that price reaches the Nisaab (i.e. the minimum amount liable for Zakat) and a lunar year passes after owning it. Know that the amount of Zakat that should be paid is 2.5% of the total amount. Allah will reward you for what you had paid as Zakat.

Know that every plot or piece of the land that are initially possessed with the intention of acquisition are not subjected to Zakat even if the owner changes his mind later on and sells or trades with them, since merely the intention does not change their state, i.e. they are not considered as trade goods.

On the other hand, the land that is purchased with the intention of selling after its price becomes higher is subject to Zakat since the intention of trade that is getting better price exists in this case.

Allah knows best.

Mofti: The Fatwa Center at Islamweb