Dividend Purification Calculator

A company can pass the Shariah screen even though a little of its income comes from interest, for example on its bank balances. The KMI screen allows non-compliant income of up to 5% of revenue. If you hold shares in such a company, a matching slice of every dividend is income you may not keep. Purification means giving that slice away to the needy.

It is not a penalty and not a reason to avoid compliant stocks: it is a routine step of Shariah-compliant investing, like paying zakat, and it is usually a small amount.

With per-share figures, the same maths applies to the dividend per share. The only number you need to look up is the ratio. Shariah advisors, fund houses and the screening reports behind the KMI index publish it company by company, and it changes a little each time a company reports new results, so use the latest figure.

A dividend of Rs 50,000 from a company with a 1.5% ratio needs Rs 750 given away, leaving Rs 49,250. How the amount grows with the ratio, on a Rs 100,000 dividend:

Even at the 5% screening limit, which few stocks reach, the charity share of a dividend is small.

Scholars differ on whether the profit from selling a compliant share needs purifying. One view says the share price reflects the whole company, whose business is halal, so only dividends are affected. Another applies the same ratio to the gain. If you sold shares for a Rs 200,000 gain and your scholar asks you to purify it too, a 1.5% ratio adds Rs 3,000 to the Rs 750 on a Rs 50,000 dividend, Rs 3,750 in all. The calculator keeps this optional because it is a matter of scholarly opinion. The tax on the gain itself is separate: see the capital gains tax calculator.

1. Collect your dividends. Your broker or CDC statement lists every dividend credited to you, with the date and amount. Purify each payout; do not wait for a single annual total unless your scholar says that is fine.
2. Find the ratio for each company from the latest Shariah advisor or fund house report. Different stocks have different ratios, so work stock by stock.
3. Work out the amount here (pick the stock, or enter the dividend), add up the totals and keep the figure aside.
4. Give it away to the needy or a welfare cause, as your scholar advises, and keep a note of what you gave and when.

Two common slips: using the wrong company's ratio, and applying the ratio to the whole value of your holding instead of to the dividend. Purification is a share of income, not of your capital. If you hold units of a Shariah-compliant mutual fund, the fund usually deals with purification itself and reports it, so check the factsheet or ask the fund house before doing it twice.

The purification ratio comes from one of the screens a company must pass to enter the KMI Shariah-compliant list:

• Core business is halal.
• Interest-bearing debt below 37% of total assets, tightening to 33% from the November 2026 recomposition.
• Non-compliant investments below 33% of total assets.
• Non-compliant income below 5% of revenue. This is the number you purify.
• Illiquid assets at least 25% of total assets, and a share price at or above net liquid assets per share.

Check a stock against these tests with the Shariah compliance calculator. Purification is separate from zakat on the same shares, which the zakat calculator covers, and from the tax withheld on the dividend (see the dividend tax calculator).