Welcome to Khidmat Foundation Zakat guide, answering all your questions about Zakat and offering advice on working out how much Zakat you need to pay. While we’ve tried to provide as many answers as possible, for individual questions we would recommend speaking to your local Imam.
What is Zakat?
Zakat is the annual payment made by Muslims to support those most in need. It is one of the Five Pillars of Islam and is a key part of the Islamic faith. By donating a certain percentage of your wealth in order to help those less fortunate than yourself, you can please Allah (SWT) while supporting your brothers and sisters across the world.
Who is Eligible for Zakat?
There are two ways to answer this question – who is eligible to pay Zakat and who is eligible to receive Zakat.
As defined by the Zakat rules, those eligible to pay must be:
* Muslim
* Free
* Of sound mind
* Past the age of puberty
* Have positive cash or goods flow
* Have a total personal wealth higher than the Nisab value
In summary, any adult Muslim who is working or earning more than is necessary to fulfil their everyday essential needs is expected to pay a percentage of their wealth as Zakat.
Those who are eligible to pay Zakat follow the teachings of the Holy Qur’an (Chapter at-Tawbah Tevbe, 60) as:
“As-Sadaqat (Zakat) are only for the Fuqara’ (poor), and Al-Masakin (the needy) and those employed to collect (Zakat funds); and for to attract the hearts of those who have been inclined (towards Islam); and to free the captives; and for those in debt; and for Allah’s Cause (i.e. for Mujahidun – those fighting in the holy wars), and for the wayfarer (a traveller who is cut off from everything); a duty imposed by Allah. And Allah is All-Knowing, All-Wise.”
Those eligible to receive assistance from Zakat payments include:
* (Fakir) The poor who have no or low income
* (Miskin) The needy who do not have a day’s food
* (Amil) Those employed to distribute Zakat
* (Riqab) Anyone in slavery or captivity
* (Gharmin) Anyone in unmanageable debt
* (Fisabillillah) Anyone who fights for Allah (SWT)
* (Ibnus Sabil) To assist stranded or struggling travellers
* (Muallaf) Those new to the Muslim faith or friends of the Muslim community
What is Nisab?
The term Nisab is defined as the threshold amount that a Muslim’s wealth should total to make them eligible to pay Zakat. There are two values used to calculate the Nisab threshold – gold and silver at the value of 612.36 grams of silver and 87.48 grams of gold. The monetary value is calculated on the current price of gold and silver when working out your Zakat contribution.
When talking about Nisab thresholds, you may also come across the term ‘Hawl’ which is the term used to describe the lunar year, the Islamic year or 354 days. The payment of Zakat is expected to be made once every Hawl after your wealth has crossed the Nisab threshold and has remained above the threshold for a full Islamic year.
When Should I Pay Zakat?
Once your wealth has passed the Nisab threshold, you are eligible to pay Zakat. However, it is not paid straight away. Zakat should be paid after your wealth has been held for a full lunar year but only if the value remains above the minimum threshold amount.
Should your wealth increase or decrease, your Zakat amount should adjust accordingly, however, if your held assets fall below the Nisab threshold, you are no longer eligible to pay Zakat. The amount of Zakat due is calculated based on the value of personal wealth at the end of the Islamic year. Many Muslims choose to pay their Zakat during Ramadan as this offers greater blessing and reward, although you can pay your Zakat at any time of year.
When talking about Nisab thresholds, you may also come across the term ‘Hawl’ which is the term used to describe the lunar year, the Islamic year or 354 days. The payment of Zakat is expected to be made once every Hawl after your wealth has crossed the Nisab threshold and has remained above the threshold for a full Islamic year.
How Much Zakat Do I Need to Pay?
Zakat is calculated on the following:
* 2.5% on annual savings and personal wealth
* 5% on farmer’s assets where crops are irrigated out of the farmer’s pocket
* 10% on farmer’s assets where crops are irrigated by rain
* 20% on precious resources found on your property within the lunar year, such as oil, gold and silver
Assets and personal wealth must fall above the Nisab threshold in order to be included in the calculation.
What Needs to Be Included in My Zakat Calculation?
Zakat is calculated on your personal assets and held monies, although only on physical goods that do not contribute to comfortable day to day living. For example, you would only calculate Zakat on a second property, not the one you live in. The same with calculating Zakat on a vehicle – it is not due on the first but any additional cars must be included in your calculation.
Your assets are considered a total sum of the following:
* Cash in savings, either in the bank or at home
* Funds raised for special circumstances, i.e. wedding, hajj, property deposit
* Total value of owned gold and silver
* Total value of held shares at market value
* Total value of the stock you hold if you own or run a business
* Total value of rental income from owned property
* Any money in debt to you that you expect to see returned
Anyone who owns multiple properties should only include the gathered rental income and any profit at the time of sale towards their Zakat calculation.
The following is not considered in the Zakat calculation or are considered your liabilities:
* Personal items including clothing and appliances
* Money owed to others including card debts, mortgages and personal loans
* Rent or mortgage payment for the month you pay Zakat
* Bills that are outstanding in the month you pay Zakat
For business owners:
* Any business expenditures such as rates, salaries, bills and rent
* Short-term business loans or business overdrafts
To work out your total wealth there is a simple calculation you can use:
Personal or business assets less short-term liability equals your wealth.
Where your wealth is higher than the calculated Nisab threshold, you are eligible and expected to pay Zakat.
Can I Pay My Zakat in Instalments?
Zakat can be paid in instalments, however, it is preferred that your Zakat is paid in a single transaction. Where you are assured your wealth is not likely to change, you can pay your Zakat in advance of the anticipated due date.