Zakat on banknotes

Question

Nowadays banknotes of one and two rupees have come into general circulation, and the silver rupee no longer remains. Some people make the excuse: zakat is [due] on gold and silver or on their coin, whereas we have neither gold nor silver nor their coin — we have banknotes, which do not fall under the ruling of the obligation of zakat. Moreover, when zakat is being paid, the scholars say: exchange the banknotes for silver rupees or for coins of metal etc. and [then] pay the zakat.

Answer

(1) A banknote is not itself a coin of silver or gold; rather, it is a receipt for that [property] which is owed as a debt by the government or the bank, and by means of this banknote [its holder] has the ability to recover it. Therefore, in reality, zakat is wajib on that property. It is better to give in zakat that itself or something of its value — grain, cloth etc.

Source: Fatawa Mahmudiyya

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