Short answer
Yes, on a loan you expect to get back. In the Hanafi school its zakat is counted every year, but you may wait and pay for all the past years when it is repaid; most people simply include it in their yearly zakat. Debts you are unlikely to recover carry no zakat until the money is actually back with you.
A strong debt, such as a loan or the price of trade goods you sold, is zakatable every year, and payment becomes binding as it is received, for all the years it was outstanding. A weak claim, such as unpaid mahr, is zakatable only after it is received and a year passes. Money that is lost, or a debt denied with no proof, carries no zakat for the past years.
Other madhhabs
- Shafi'i
- Zakat on a debt owed by a willing, solvent debtor is paid every year without waiting for repayment. For a debt that is hard to recover, zakat for the past years is paid once it is received.
- Maliki
- A loan is zakated for one year only when it is repaid, however many years it was outstanding.
Explanation
Money you lent is still your wealth, just held by someone else. In the Hanafi school, zakat on a good debt (one the borrower admits and can pay) builds up each year. You are not required to pay it until you are repaid, but then you owe it for every year. To avoid a large bill later, and to avoid forgetting, many scholars advise adding such loans to your zakat sum every year.
Other claims are treated differently:
- Hard-to-recover debts, where the borrower denies the loan and you have no proof, or cannot pay for the foreseeable future: no zakat until you get the money. Then it joins your wealth from that day.
- Unpaid mahr owed to a wife: zakatable only after she receives it and a year passes.
- A refundable deposit, such as one held by a landlord: it is still your money, so most scholars count it like a good debt.
A common question is whether you can write off a loan and count it as zakat. In the Hanafi school you cannot, because zakat must be handed over into the recipient's ownership (tamlik). What you may do is give zakat to a poor borrower, who can then use it to repay you, as long as you do not make that a condition.
For the other side of the ledger, see do debts reduce your zakat.
The evidence
Quran, Surah At-Tawba 9:60
۞ إِنَّمَا ٱلصَّدَقَٰتُ لِلْفُقَرَآءِ وَٱلْمَسَٰكِينِ وَٱلْعَٰمِلِينَ عَلَيْهَا وَٱلْمُؤَلَّفَةِ قُلُوبُهُمْ وَفِى ٱلرِّقَابِ وَٱلْغَٰرِمِينَ وَفِى سَبِيلِ ٱللَّهِ وَٱبْنِ ٱلسَّبِيلِ ۖ فَرِيضَةًۭ مِّنَ ٱللَّهِ ۗ وَٱللَّهُ عَلِيمٌ حَكِيمٌۭ ﴿٦٠﴾
Zakah expenditures are only for the poor and for the needy and for those employed to collect [zakah] and for bringing hearts together [for Islam] and for freeing captives [or slaves] and for those in debt and for the cause of Allah and for the [stranded] traveler - an obligation [imposed] by Allah. And Allah is Knowing and Wise.
Debtors are among the recipients of zakat, so zakat can be given to a poor borrower.
Where the ruling is recorded
- Radd al-Muhtar, Kitab al-Zakat, chapter on the zakat of wealth, section on strong, middle and weak debts. The three kinds of debt and when zakat on each is paid.
- Bada'i al-Sana'i, Kitab al-Zakat, on wealth that is lost or out of reach (mal dimar). No zakat for past years on lost or denied wealth.
- Mukhtasar Khalil with al-Sharh al-Kabir, Bab al-Zakat, section on debts. The Maliki rule of one year's zakat on receipt.
- Minhaj al-Talibin, Kitab al-Zakat, on the zakat of debts. The Shafi'i rule for solvent and insolvent debtors.
This answer is pending review by the scholars on our team. Quran translation by Sahih International. Hadith Arabic from the standard editions of the six books and the Muwatta, with gradings as recorded there; the English is our own rendering. Spotted a mistake? Tell us.