Portfolio Purification Calculation and Payment Evidence Checklist
Portfolio purification needs a repeatable evidence trail. A calculation without holdings, dates, source documents and a recorded methodology is difficult to review or correct later. This checklist organises the work for an investor, adviser and qualified Shariah reviewer.
Educational information only: This is not a fatwa, tax opinion or investment recommendation. A qualified Shariah scholar should confirm the applicable methodology, and a registered tax practitioner should address tax treatment where necessary.
1. Approve the methodology first
Record the Shariah standard or reviewer guidance being applied, the portfolio scope and the calculation period. Do not mix methods across holdings without documenting why.
2. Freeze the holdings list
Export securities, funds, cash and corporate actions for the review period. Include identifiers, units, acquisition dates and disposal dates so the calculation population can be reproduced.
3. Define the review dates
State whether the exercise is transaction-based, distribution-based, annual or linked to a screening date. Record cut-off dates and how late statements will be handled.
4. Gather income evidence
Retain dividend advices, fund statements, cash-ledger entries and issuer notices. Reconcile gross amounts, withholding tax and the net amount received instead of working only from bank deposits.
5. Capture issuer or fund data
Record the financial figures, purification ratio or manager-provided amount used for each holding. Save the source, publication date and reporting period beside the value.
6. Check corporate actions
Review special dividends, capital distributions, mergers, spin-offs and return-of-capital events separately. Their labels and accounting treatment may differ from ordinary distributions.
7. Apply ownership periods consistently
Where the approved method considers ownership dates, document the number of units held and relevant dates. Explain assumptions for partial disposals, transfers and pooled accounts.
8. Reconcile currencies
Record source currency, payment currency, exchange-rate source and conversion date. Keep the unrounded result and the final rounded amount to support later review.
9. Show every calculation
For each line, retain the input amount, approved percentage or rule, formula and result. Totals should link back to the underlying statements without manual gaps.
10. Separate purification from tax
Keep the Shariah calculation distinct from tax deductions, charitable rebates or accounting classifications. Ask a tax practitioner how any payment should be treated in a return.
11. Record the payment decision
Document the amount approved, approval date, decision maker and intended payment route. If amounts are aggregated, preserve the link to each underlying holding.
12. Retain payment evidence
Keep proof of payment, recipient details, date, reference and any acknowledgement. Protect beneficiary privacy and avoid describing the payment in a way that promises a tax result.
13. Handle uncertainties
Put missing data, disputed figures and unclear events into an exceptions register. Assign an owner and review date; do not silently substitute an estimate for verified evidence.
14. Correct prior periods transparently
When better data arrives, preserve the original calculation, correction and reason. Record any additional payment rather than overwriting the audit trail.
15. Close the annual file
Approved method and reviewer
Holdings and distribution reconciliations
Source documents and calculations
Decision and payment evidence
Exceptions, corrections and next review date
Useful official starting points include FSCA regulated-entity information, SARS personal income tax guidance and the International Islamic Fiqh Academy. These sources provide regulatory or scholarly context; the applicable method still needs qualified review.
The completed file should allow another reviewer to reproduce the amount, trace it to source evidence and see when and how payment was made.
