What to do When a Halal Stock Turns Non-Halal? Halal Investors Guide (2025)

When you invest in Halal stocks to keep your money Halal, one of the biggest challenges is making sure those stocks remain Halal and Shariah-compliant over time. What many investors don’t realize is that a stock’s Halal status is not permanent — it can change from Halal to non-Halal whenever the company releases a new financial report or makes any changes in its business activities.

This change usually happens due to factors like an increase in the company’s debt levels, a rise in non-permissible income, or a shift in its core business activities. In this article, we’ll explain exactly why a stock’s Shariah status changes and, more importantly, What to Do When a Halal Stock Turns Non-Halal, in every possible scenario when that happens, whether to hold, exit, or purify your profits.

Why Stocks Halal Status Changes?

A stock is considered Halal or not based on a screening process that reviews the company’s financials and core business activities. The Shariah Screening Process we follow, whose Shariah Advisory Board members carefully evaluate companies using specific financial criteria.

A company’s annual report is the primary and most trusted source for this screening because it includes verified and detailed financial information. It’s important to remember that a stock’s Halal status is connected to the date the company submits its annual report to the stock exchange. Every time a new report is released, the stock’s compliance status can change based on updated financial numbers.

What to do When a Halal Stock turns Non-Halal?

Now, let’s talk about what you should do if a stock you’ve invested in was Halal earlier but later turns non-halal. It depends on the reason for the status change, and you have a following options:

Situation 1 – If It Becomes Non-Compliant Due to a Change in Core Business

If the company changes its main business activities to something impermissible in Islam (like conventional banking, alcohol, or gambling), you must exit the stock immediately. Not just that, you also have to donate all profits (capital gains + dividends) earned from the date it became non-compliant.

Situation 2 – If It Becomes Non-Compliant Due to an Increase in Impermissible Income

Sometimes, a stock remains in the same business but its income from non-permissible sources (like interest income) crosses the allowed limit.

In this case, It’s better to exit the stock Or, you can choose to wait for the next annual report. If the stock turns Halal again, you can keep holding it and purify the profits with the highest purification ratio applicable during the holding period.

If a stock had a purification ratio of 4% at the time of purchase and it later increased to 6%, and then turned Halal again, you must purify profits using the maximum ratio (in this case, 6%).

A Practical Example to Understand This Better

Let’s simplify this with an example so you know exactly how to handle such situations:

You invested in a stock in December 2023, and it was Halal as per the 2023 Annual Report (released on 10th June 2023).

In the next 2024 Annual Report (released on 20th May 2024), the stock turned non-compliant. Here, you could either wait for the next report or exit immediately.

Now, in the 2025 Annual Report (released on 10th May 2025), if the stock still remains non-compliant, you must exit immediately.

What to Do About the Profits?

Profits earned from December 2023 to 20th May 2024 are Halal.

Profits earned after 20th May 2024 until the exit date must be donated entirely to charity, without expecting any reward.

If you exited the stock on, say, 15th December 2024, you’ll need to calculate the profits earned between 20th May 2024 to 15th December 2024 and donate that amount.

Important Points to Remember

• If a stock turns non-compliant due to a core business change, exit immediately and donate all profits from the date of non-compliance.
  
• If a stock turns non-compliant because of impermissible income, you have two options:
  
  • Exit right away.
  • Or wait for the next annual report. If it becomes Halal again, purify profits based on the highest purification ratio applicable during your holding period.
    
• If you’re a long-term investor, it’s advisable to regularly purify profits (capital gains + dividends) using a 5% purification ratio during the holding period, even if the stock remains compliant.
  

Conclusion

Shariah compliance in stock investments isn’t a one-time check, it’s a continuous responsibility. As a responsible Halal investor, you need to regularly track your stocks’ compliance status and act according to the latest annual reports.

By following this clear, step-by-step approach, you can make sure your investments remain Halal, your profits are purified properly, and you continue investing ethically within the boundaries of Islamic financial principles.

Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult your financial advisor before investing.