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Purification (tazkiyah) is the process of cleansing investment returns by donating the portion derived from non-compliant sources to charity. It addresses unavoidable exposure to prohibited income in otherwise Shariah-compliant investments.

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Beginner

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What It Means

Even Shariah-compliant companies may generate small amounts of non-compliant income—typically interest earned on cash holdings. Purification requires calculating this tainted portion of any dividends or gains received and donating it to charity, ensuring your net returns are halal.

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Practical Example

You own shares in a technology company that is Shariah-compliant overall, but 2% of its revenue comes from interest on corporate cash holdings. If you receive $1,000 in dividends:
The $20 must be donated to an approved charity.

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Why It Matters

Purification allows Muslims to invest in a broader universe of stocks while maintaining religious compliance. Without purification, investors would be limited to only companies with zero non-compliant income—an impractically small universe.

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Advanced

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Purification Calculation Methods

For dividend income:
For capital gains on reclassified securities:
For interest on cash holdings:

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Purification Thresholds

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Timing and Documentation

Best practices for institutional purification:
  1. Tracking: Maintain records of non-compliant income ratios for all holdings
  2. Calculation: Compute purification amounts at least annually
  3. Approval: Charitable recipients should be approved by Shariah board
  4. Documentation: Retain donation receipts for audit purposes
  5. Reporting: Include purification summary in annual Shariah audit

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Eligible Charitable Recipients

Purification funds are typically directed to:
  • Poverty alleviation programs
  • Education initiatives
  • Healthcare access
  • Humanitarian relief
  • Community development
Purification is not zakat (obligatory alms). Purification funds cleanse tainted income and cannot be counted toward zakat obligations. The donor does not receive spiritual reward for purification—it simply removes the haram element.

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Reclassification Protocol

When a holding is reclassified from compliant to non-compliant:

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Related Terms

Riba

Prohibition on interest

Shariah

Islamic law framework

Halal Investing

Permissible investments