Purification refers to disposing of unacceptable profits by donating them to charity. Of course, Shariah does not allow Muslims to profit from unacceptable practices and impermissible sources. So, Muslim investors are expected to eliminate any income derived from riba or other haram sources. Subsequently, Shariah scholars have given direction on the topic of income purification. Purification simply means deducting from one’s investment those earning the source of which is not acceptable from Shariah perspective. The fund’s investment manager will determine the amount of impure income according to the Shariah guidelines and donate periodically to charity. Indeed, Shariah does not allow you to use prohibited components of the income in any circumstances.
The calculation for the purification amount is as follows,
1. Calculate the percent of impure income per share: Take total income from impermissible operations during the year and divide it by the total number of shares outstanding in the company. This should give you the percentage of purification required per share that you have.
2. Multiply the percent of impure income per share by the equity you have in the company.
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