Question:

In Mumbai when renting a house there is a custom of taking a deposit with the rent. It is very difficult to get a house without paying this deposit. The question is, there is a widow who does not own a house. She gave the deposit and lives by rent. There is no one who earns in the house. She is the one that works, pays the rent and runs the house financially. Will she have to pay zakat on the sum that she has deposited? Is she pays zakat from the deposit then a time will come when it will be depleted. Then she will have no house. Will this deposit be considered part of her essentials?

Answer: حامدا ومصليا ومسلما

The deposit is in the ruling of rahn (collateral). There is no zakat on collateral, neither on the borrower or lender. Even when it is returned the owner does not have to pay zakat of the pass years on it.

It is mentioned in “Islamic Fiqh Academy ke Aham Faisle” (p. 47):

“Zakat is not compulsory on the security deposits that the lessee initially gives to the owner of the house or shop.”

And Allah Ta’aalaa knows best
(Hazrat Mufti) Ahmed Khanpuri (May Allah preserve him)
Mahmoodul Fataawaa (2/26-27)