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:
1- The payment of zakah on gold jewelry is originally not obligatory as it is religiously permissible for women to wear gold jewelry.
2- Gold jewelry can be subject to zakah payment under two conditions; 1- when the amount of gold jewelry is above the urf (custom); 2- when gold jewelry is purchased with the intention of keeping it for investment.
In responding to your question, the Islamic Religious Council of Singapore (MUIS), states:
After a careful study of this issue, the Fatwa Committee concurred with the fatwa of 1995 that the payment of zakah on gold jewelry is originally not obligatory (wajib) as it is religiously permissible for women to wear gold jewelry.
Therefore, gold jewelry is originally not subject to zakah payment. This is based on several hadiths of Prophet Muhammad (peace be upon him). The Prophet said: “There is no zakah in jewelry.” (At-Tirmidhi)
Similarly, in another hadith narrated by Imam Malik in Al-Muwatta’:
Yahya related to me from Malik from Abd ar-Rahman ibn al-Qasim from his father that Aishah, the wife of the Prophet (PBUH), used to look after the orphaned daughters of her brother in her house. They had jewelry (which they wore) and she did not take zakah from this jewelry of theirs.
Nevertheless, the Fatwa Committe is of the opinion that gold jewelry can be subject to zakah payment under two conditions:
1- When the amount of gold jewelry is above the urf (custom).
2- When gold jewelry is purchased with the intention of keeping it for investment.
Excessive wearing of jewelry
The wearing and using of any permitted items in Shariah is guided by two main principles. Firstly, it must not lead to any extravagant usage, and secondly, it must not lead to feelings of pride and superiority.
The Prophet (peace be upon him) said: “Eat, drink, wear clothes and give sadaqah but with neither extravagance nor pride.” (Abu Dawud)
Henceforth, some scholars opined that gold used as jewelry are originally not subject to zakah, but it may be subject to zakah when the amount under one’s possession exceeds the normative amount in the society (urf). This is as explained in the following hadith:
“A woman came to the Messenger of Allah (PBUH) accompanied by her daughter, who wore two heavy gold bangles. He said to her, “Do you pay Zakah on them?” She said, ‘No.’ He then said, “Are you pleased that Allah may put two bangles of fire on your wrist on the Day of Judgment?” She then threw them away. (An-Nasa’i)
Definition of normative amount (urf) on gold jewelry
Fatwa Committee views that the allocation of 20 mithqal in the fatwa text 1995 is inaccurate and must be replaced with 200 mithqal.
Fatwa Committee also agrees that the urf amount remains at 200 dinar, 200 mithqal and 86 grams.
Imam An-Nawawi said:
“Some of the Shafi`i scholars said: All kinds of gold is allowed for women. It is permissible for them as long as there is no excessive and extravagant usage. If the gold jewelry is bangle-shaped with a weight of 200 dinars, the correct opinion concluded by many of the Shafi`I jurists in Iraq is that, it is not permissible for this kind of gold jewelry to be worn.” (Al-Majmu` Sharh Al-Muhadhdhab, vol. 5, p. 523)
The Fatwa Committee views that zakah becomes obligatory on jewelry only when a piece of jewelry reaches 86 grams.
The Fatwa Committee also believes that when the amount of gold has reached the `urf amount, the payment of zakah must be calculated based on the total weight of the gold jewelry, and not only from the weight which exceeds the `urf amount.
Gold jewelry that are kept for the purpose of investment
The Fatwa Committee has studied opinions of the jurists on this issue. In Al-Majmu’, Imam An-Nawawi explained:
“Our companions (the Shafi`i scholars) are of the opinion that if an individual owns gold jewelry and he (or she) has no intention of using it for jewelry purposes, be it for prohibited (haram) usage, for non-recommended (makruh) usage or for permissible (halal)purposes, instead the intention is purely to own and keep the gold, therefore, the correct opinion that was elucidated by the author9 and the majority view is that it is obligatory for zakah to be paid on this.” (Al-Majmu` Sharh Al-Muhadhdhab, vol. 5, p. 523)
In this regard, the Fatwa Committee has concluded that gold jewelry that is kept for the purpose of investment must be subject to zakah if it has reached the nisab rate of 86 grams, and the zakah must be calculated based on the total weight of the gold jewelry.
Almighty Allah knows best.