Generally Islamic scholars divided wealth into two categories:
1. Naqd (cash), which refers to gold and silver, and what takes the place of that namely paper currency (fiat money). Zakat is due on this category if it reaches the nisab or minimum threshold as prescribed in Islamic teaching (generally it’s equal to value of 85 grams of gold), and one full year has passed since it was acquired.
2. ‘Ard (property), which includes everything of value that a person may own other than cash, whether it is real estate or movable property. Imam An-Nawawi said: ‘With regard to ard (translated above as property), the linguists said that this refers to all categories of wealth other than gold and silver. [End quote from Tahreer Alfaaz at-Tanbeeh (p. 114). See also: az-Zaahir fi Ghareeb Alfaaz ash-Shaafa‘i by al-Azhari (p. 108)].
Does zakat due on ‘Ard?
Everything that a person possesses of real estate, animals, furnishings, clothing, books and so on is called ‘ard (plural: ‘urood). No zakat is due on this category, unless it is intended for trade.
Property and goods that the Muslim is keeping for trade are subject to zakat, whether they are real estate properties, animals, furnishings, electrical appliances, parts (e.g., for cars and appliances), books, food items, clothing, fabric, textiles, construction materials, cars, and so on.
As for goods that a Muslim keeps for any other purpose apart from trade, such as if he is keeping them and using them, such as clothing, furnishings, cars, the house he lives in, or a house he acquires to make money from it, such as property that he rents out, or a car that he hires out (like taxi services) – no zakat is due on this category of goods, according to scholarly consensus, no matter how much of it he acquires or how valuable it is.
This is indicated by the report narrated by Imam al-Bukhari (1463) and Imam Muslim (982) from Abu Hurairah (may Allah have mercy on him), who said: The Prophet (blessings and peace of Allah be upon him) said:
“No zakat is due from the Muslim on his horse or his slave.”
Ibn al-Mulaqqin said:
“This hadith is the basic principle regarding all personal property: no zakat is due on it.” [End quote from at-Tawdeeh li Sharh al-Jaami‘ as-Saheeh (10/448)].
HOWEVER, zakat is still obliged on income acquired from the non-obligatory property of zakat, but able to bring income by way of rent or sale, for example: Rental of houses, buildings, factories, premises, businesses and so on; Car rental, transport, equipment, assets, etc.; and Products produced by livestock such as milk, eggs, honey and so on.
This is the view of Dr. Husayn Shahatah, and generally been called as Zakat al-Mustaghallat.
This is indicated by word of Allah SWT in Al-Quran in Surah al-Baqarah verse 267 (meaning):
“O you who have believed, spend from the good things which you have earned and from that which We have produced for you from the earth. And do not aim toward the defective therefrom, spending [from that] while you would not take it [yourself] except with closed eyes. And know that Allah is Free of need and Praiseworthy.” [Al-Quran, Surah Al-Baqarah (2): 267]
Everything that a person owns of wealth and property, apart from gold, silver and cash, is not subject to zakat, unless it is for trade, such as cars, real estate and so on. HOWEVER, zakat is still obliged on income acquired (such as rental) from this kind of wealth and property.
And Allah knows best.