When calculating Zakat, is the full value of the debt incurred from purchasing an apartment through an Ijara-wa-Iqtina (lease-to-own) system deducted, or only the installments for the current lease year?

The petitioner in a lease-to-own or diminishing Musharakah (definition) agreement is not, in principle, a debtor, because the sale is not concluded until the lease contract is complete. The relationship between the petitioner and the bank is a lease, not a sale. The installments paid by the petitioner are not a debt from a deferred sale, and therefore, they are not deducted from the wealth on which zakat (definition) is due.

Contemporary researchers addressing modern zakat issues discuss the zakat of the lessor or owner. They hold that the zakat on assets leased under a lease-to-own arrangement is subject to the ruling of zakat on exploited assets. Thus, the lessor is obligated to pay zakat on the lease installments he receives if a hawl (lunar year) passes over them after their receipt.

The leased assets remain owned by the lessor. The rents received before they are due are considered an unstable debt. However, the rents that are due to the lessor by contract and benefit, but have not been paid by the lessee, are stable debts to which the rules of zakat apply.

If the bank stipulates that all annual installments become due immediately if the client ceases payment, then the remaining installments for the year become a stable and deferred debt. In this case, they are deducted from the wealth on which zakat is paid if the client does not possess other wealth exceeding his basic needs.