Zakat is not wajib on a debtor

Question

Hamid is a businessman; he has money in a company as a security deposit, but he owes debts greater than the amount of that security. Since the creditor trusts him, there is no demand [for repayment]. What about the security money — should he pay zakat on it or not? If he pays, he must first pay the debt, and if he pays the debt, nothing remains; and if he takes the money out of the company, the business comes to a halt. What is the ruling on this?

Answer

In this situation zakat is not wajib upon him.

Source: Fatawa Mahmudiyya

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