The Ruling on Installment Sales

Question : The questioner says: Honorable Shaykh, how is the zakah calculated on the money from installment sales for those who sell cars on installment? How is the zakah calculated on the money from installment sales for those who sell cars on installment?

Answer : Selling on credit is permissible by the Book and the Sunnah. As for the Book, Allah the Exalted said: As for the Sunnah, it is established in the two Sahihs the hadith of Ibn 'Abbas (may Allah be pleased with him and his father), who said: The Prophet (peace and blessings be upon him) came to Here, the item sold was deferred, and the price was immediate. So installment sales are permissible, but on the condition that they conform to the Shari'ah. For example, a man sells his car to another person for an installment price, or sells his house to another person for an installment price, or sells his land to another person for an installment price. However, if the item is not with the seller, but he goes to buy it for you and then turns it over to you, this is not permissible. This is because the seller in this case sold something he did not own. Also, because the seller would not have bought it or even thought about it if you had not agreed with him on this item. And because this is a clear stratagem to lend you money.
With riba (usury or interest), because its reality is that he bought this item for you, paid the price on your behalf, and took an increase from you due to the installments. And stratagems do not make permissible what Allah has forbidden. Rather, stratagems to commit what is forbidden only increase its ugliness and prohibition. So a person must, in all matters, stay away from deceiving Allah (Mighty and Majestic).
So now, if the item is with the seller and he sells it on installment, completing the answer, this is permissible. But if it is not with him, and you agree with him that he will buy a specific item for you and then sell it to you for an installment price higher than the price he bought it for, this is not permissible. It is not like 'inah (a buy-back sale used to disguise a loan); rather, it is 'inah according to the opinion of those who hold that 'inah is any riba transaction involving deception. Yes, yes.

Question : The questioner says: Honorable Shaykh.

Answer : He asks about zakah. As for how zakah is paid on the price of goods sold on installment, its ruling is the same as the ruling on zakah of debts. The principle regarding the zakah of debts is that zakah is obligatory every year on a debt owed by a person of means. However, you have a choice: if you wish, you may delay its zakah until it is paid with your other wealth, or if you wish, you may delay its zakah until you receive the debt, and then you pay the zakah on what has passed. As for a debt owed by a poor person or by a rich person whom you cannot demand payment from, there is no zakah on it for you unless you receive it. If you receive it, you pay zakah on it for the year of receipt only. If it remains with you until the next year, you pay zakah on it; otherwise, you do not. Are there any questions? No, that is all.