In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
In his response to your question, Sheikh Ahmad Kutty, a senior lecturer and Islamic scholar at the Islamic Institute of Toronto, Ontario, Canada, states:
The way to go about it is to estimate the value of the entire jewelry you have in the bank or saved at the end of the year, and take out zakah at the rate of 2.5 of the total value.
You must go through this procedure every year since the price of gold changes, and the amount of zakah payable also varies accordingly.
According to authentic reports, the Prophet (peace be upon him) allowed his uncle Al-Abbas to take out zakah in advance before the due time in order to pay to those who were deserving and in need.
As for the precious stones and diamonds, we should pay zakah on them too so long as they are kept as savings, although there are scholars who consider them as exempt from zakah.
The latter view, however, does not seem to be in agreement with the overall purpose and objectives of zakah; for precious stones and diamonds today have become major ways of hoarding wealth.
Thus, if we were to exempt them from zakah, we would be exempting a major chunk of the wealth of the rich people from zakah, while ironically taxing those poor farmers who may be scraping for a living by tilling and ploughing the earth.
This is indeed absurd and totally inconsistent with the spirit of the Shari`ah which is based on social justice.
Therefore, it is only reasonable to state that one must pay zakah on precious stones and diamonds that are saved by estimating their value at the end of the year and paying zakah on them at the rate of 2.5 of their total value every year.
If one has both jewelry and precious diamonds, it is enough to calculate the total value of all of them together and take out zakah at the rate of 2.5 percent of their total value.
Almighty Allah knows best.