Question:
Assalamualaikum wbt. I would like to ask. Is zakat on savings applicable for money invested in digital investment via robo-advisor?
Hope for an explanation. Thank you.
BRIEF ANSWER
It is wajib to pay zakat on savings for digital investment via robo-advisor if it exceeds the nisab which is 85 gram of gold and the period of the saving completes a haul (one full year). This is because, it is among the savings and a flourishing investment. So, it becomes a source of money where zakat is taken from.
EXPLANATION
Alhamdulillah, praise and thanks to Allah for the countless blessings He has blessed us all with. Blessings and salutations to the Prophet Muhammad PBUH, his wives, his family, companions and all those that follow his teachings to the day of judgement.
Firstly, it should be understood that money has an exchange value and power in possessing something the same as silver and gold. If we consider the investment value via digital investment platform mentioned is shown in the form of cash value and it can be withdrawn anytime. So, it is categorised under savings.
Hence, nisab for these savings is in accordance with the nisab for silver and gold which is 85 grams for gold or 595 grams for silver. If the savings reaches this nisab calculation and the period of saving reaches one haul (one full year), so, it is wajib to pay zakat on savings for 2.5% from the total amount. This is in accordance with the Prophet PBUH’s hadith where he said:
إِذَا كَانَتْ لَكَ مِائَتَا دِرْهَمٍ وَحَالَ عَلَيْهَا الْحَوْلُ فَفِيهَا خَمْسَةُ دَرَاهِمَ وَلَيْسَ عَلَيْكَ شَىْءٌ - يَعْنِي فِي الذَّهَبِ - حَتَّى يَكُونَ لَكَ عِشْرُونَ دِينَارًا فَإِذَا كَانَ لَكَ عِشْرُونَ دِينَارًا وَحَالَ عَلَيْهَا الْحَوْلُ فَفِيهَا نِصْفُ دِينَارٍ فَمَا زَادَ فَبِحِسَابِ ذَلِكَ
"When you possess two hundred dirhams and one year passes on them, five dirhams are payable. Nothing is incumbent on you, that is, on gold, till it reaches twenty dinars. When you possess twenty dinars and one year passes on them, half a dinar is payable. Whatever exceeds, that will be reckoned properly."
Sunan Abi Dawud (1572)
Besides, savings for investment as asked above is included among flourishing savings. So, it becomes the source of money where zakat is taken from. This is in accordance with a maxim which states that:
كل مال نام فهو وعاء للزكاة
“Each flourishing property is the source for zakat”
While for the more accurate calculation and method of payment, it should be referred to Zakat Institutions in all respective states.
Conclusion
Based on the above discussion and arguments, we conclude that zakat is obligated for savings invested in the digital investments via robo-advisor if it reaches the nisab and the period of savings completes the haul (one complete year).
May Allah SWT give us sahih understanding in His Shari’a as well as taufiq and hidayah to perform worship solely for Him. Ameen.
Wallahu a’lam.