As a consequence of conquests on a large scale in Iraq and Persia and elsewhere a question arose as to the administration of land in the conquered territories. The Arabs followed the maxim, "Spoils belong to the victors". On this basis all spoils that were won as a result of any victory were distributed to the extent of four-fifth among the conquering army, and one-fifth was sent to Madina as the State share. On this analogy the army insisted that all agricultural lands should be distributed among the conquering army, and the inhabitants should be made their serfs and slaves.

Umar convoked a special assembly at Madina to consider the question from all aspects. Eminent companions like Abdur Rahman b Auf and others supported the viewpoint of the army. They argued that the lands belonged to the conquerors, and future generations had no right to them. Bilal was so vehement in the support of the demand of the army that Umar had to exclaim "May Allah save me from Bilal."

At the assembly Umar argued that as the conquering army had already had the spoils distributed among them that was enough and the land should belong to the State. Umar advanced the argument that if the lands in the conquered territories were divided up among the army, wherefrom would they get the necessary finance for the raising and equipment of the armies in future for defence against foreign aggression and for the maintenance of law and order within the country.

Ali, Usman, and Talha supported Umar but still no decision could be reached. Then Umar recollected Sura Al-Hashr which spoke of the poor who had fled, and of those to come thereafter. From these verses Umar inferred that lands were assets in which even the coming generations were interested and as such these should be the property of the State. These verses proved decisive and a concensus was reached:

(1) that the lands conquered would be the property of the State and not that of the conquering forces;

(2) that the former occupants of lands would not be dispossessed;

(3) that they should continue in possession of tbe lands and pay specified taxes to the State.

That was a wise decision attribute to the genius of Umar. Umar took settlement operations in a scientific way. In Iraq his Settlement Commissioners were Usman b Hanif and Hudhaifah b al-Yaman. These Settlement Commissioners measured land in Iraq with such care and precision as one measures cloth. Iraq measured 375 miles long and 240 miles wide with a superficial area of 30,000 square miles. The royal dynasty's estates, endowments of fire temples, and the estates of those who had died heirless or fled the country were declared state property. The rest of the lands were left in the possession of their former occupants and assessed to land revenue per jarib according to the nature of crops sown. These rates were: wheat two dirhams per jarib per year; barley one dirham; sugar cane six dirhams; cotton five dirhams; grapes ten dirhams; date palm gardens ten dirhams and so on. In the first year the income from State land amounted to seventy lakh dirhams. Land revenue assessment under private occupation worked out at 86 million dirhams.

The whole settlement was carried out in such a way that fresh lands were extensively brought under cultivation, and the land produce increased extensively. In the year following the settlement the land revenue increased from 86 million dirhams to 100 million dirhams.

In other conquered countries no special settlements were carried out. In such countries the existing systems continued and the records in existence were adopted. In Iraq and Persia the records were kept in Persian. Umar allowed the records to be kept in Persian even after their conquest by the Muslims. In Syria the previous records were kept in Latin, and in Egypt in the Coptic. In all such cases status quo was allowed to continue.

Under the Pharaohs taxes on land in Egypt could be paid in cash or kind, and the settlement was for a period of four years at a time. When the Romans occupied Egypt the same system continued but besides the normal land revenue they levied additional levies "hereunder large quantities of grain were collected for presentation to the authorities at Constantinople. Umar abolished the additional levies and the system in vogue under the Pharaohs was allowed to continue. The rules about the method of collection were made simpler and milder. In the time of Umar the land revenue collected from Egypt amounted to twelve million dinars.

In Syria the annual collection of land revenue in the caliphate of Umar was fourteen million dinars.