Zakat On Deposits

Question:
Is the deposit one pays when renting out a house liable for zakat? In
the UK landlords are known for stealing deposits, so it is highly
likely that it may never return into one's possession. Also whatis the
ruling about entering into such a contract with a landlord involving a
deposit, when one does not know with any certainty whetherthis money
will ever be returned?
Answer:
In the name of Allah, Most Compassionate, Most Merciful,
One must always remember that paying zakat from any given wealth is
the responsibility of the owner of that wealth (malik), and not the
responsibility of the one to whom it is given for a specific duration.
It is stated in al-Fatawa al-Hindiyya :
�(From the conditions for the obligation of Zakat is having complete
control over the wealth), and that is to have ownership and
possession. If one has ownership of the wealth and not possession�or
possession and not ownership�, then zakat will not be obligatory�As
far as the commodity that has not yet been deliveredis concerned�.it
will be part of the Nisab hence zakat will be obligatory on it
according to the correct opinion.� (al-Fatawa al-Hindiyya, 1/172)
The above text implies that both ownership and possession are
necessary in order for zakat to be obligatory. The latter part of the
above-mentioned text (concerning the commodity) implies that physical
possession is not a necessary requirement for the obligation of
zakat;rather, if one has full control over the wealth and it is
redeemable whenever one desires, then this will be considered
sufficient.
In light of the above explanation, there are three scenarios with
regards to the obligation of zakat on money that is deposited when
purchasing something or when renting a property:
1) If the deposit is part of the total cost paid towards the purchase
of an item or towards the rent of a property, then the depositor is
not responsible for paying zakat from it. The one to whom it is
deposited will be responsible to pay its zakat. The reason is quite
obvious, in that the depositor no longer remains the owner of this
wealth; rather, it has now come into the ownership of the one to whom
it is deposited.
2) If the deposited money is merely given as a trust on the condition
and understanding that it will be returned, then paying zakat from it
will be the responsibility of the one depositing it. The reason being
is that zakat is the responsibility of the one who owns the wealth,
andthe one who deposits the money here is considered to be the owner
of the deposited wealth. As far aspossession over this money is
concerned, as explained earlier, as long as one has control over this
wealth one will be considered to have possession. Thus, both ownership
and possessionare found on the money that is deposited; hence, the
depositor will be liableto pay zakat.
3) If the deposit cannot bewithdrawn over a specific period, then the
ruling concerning it is similar to that of other loans given for a
specific period, or it issimilar to giving an item as security (rahn).
The Hanafi jurists (fuqaha) have categorized loans into three types.
Without going into the details, the crux of the ruling is that, itis
preferable to include themoney in one�s total possessions and pay
zakatfrom it annually. However,payment of zakat will not be obligatory
until the debt is recovered, but when it is received, zakat for the
previous years will also have to be paid. Similarly, if a zakat-able
item was given as security, zakat will not be obligatory annually, but
when the item is redeemed, zakat for the previous years will have to
be paid.
In conclusion, zakat is obligatory on the individual who is the owner
of the wealth. Thus,if the depositor is still considered to be the
owner of the wealth that is deposited, he/she will be responsible to
pay zakat from it.
As far as your query concerning the permissibility of deposits is
concerned, this has beenanswered in an earlier answer. Please search
the archives on www.SunniPath.com
And Allah knows best/