Allah says in the Quran: "And there are those who hoard gold and silver and do not spend it in the way of Allah, announce to them a most grievous penalty (when) on the Day of Judgment heat will be produced out of that wealth in the fire of Hell. Then with it they will be branded on their forehead and their flanks and backs. (It will be said to them) This is the treasure which you hoarded for yourselves, taste then the treasure that you have been hoarding." (Al-Quran 9:34-35)
Article on zakat!!
As received...
Zakat is one of the five pillars of Islam.
It has been mentioned, along with daily Prayers (Salaat / Namaz), over seventy times in the Quran.
Allahs word commanding ".....and establish regular Salaat and GIVE regular Zakat....." are referred to in many parts of the Quran.
From this we can conclude that after Salaat, Zakat is the most important act in Islam.
Just as Salaat is the most important act of worship which has to be performed bodily, so is Zakat the main act of worship which has to be performed monetarily. Those who fulfill this duty have been promised abundant reward in this world and hereafter.
Whoever evades Zakat has been sternly warned in the Quran and Hadith of the consequences.
Linguistically, ZAKAT has two meanings: purification and growth. Technically, it means to purify ones possession of wealth by distributing a prescribed amount to the poor, the indigent, the slaves or captives, and the wayfarer.
There are many major benefits of giving Zakat:
It reminds Muslims of the fact that whatever wealth they may possess is due to the blessings of Allah and as such it is to be spent according to the His commands.
Zakat functions as a social security for all. Those who have enough money today pay for what they have. If they need money tomorrow they will get what is necessary to help them live decently.
Zakat payer pays his dues to Allah as an act of worship, a token of submission and an acknowledgment of gratitude. The receiver of Zakat receives it as a grant from Allah out of His bounty, a favor for which he is thankful to Allah.
Economically, Zakat is the best check against hoarding. Those who do not invest their wealth but prefer to save or hoard it would see their wealth dwindling year after year at the rate of the payable Zakat. This helps increase production and stimulates supply because it is a redistribution of income that enhances the demand by putting more real purchasing power in the hands of poor.
Zakat is obligatory upon a person if :
He or she is an adult, sane, free and Muslim.
He/she must possess wealth in excess of specified minimum (Nisaab) excluding his or her personal needs (clothing, household furniture, utensils, cars etc. are termed article of personal needs).
It should be possessed for a complete lunar year.
It should be of productive nature from which one can derive profit or benefit such as merchandise for business, gold, silver, livestock etc.
The amount of wealth which makes one liable for Zakat is called Nisaab.
Gold 87.48 Gram 7.50Tolas 1350Grains 2.8125Troy Oz.
Silver 612.36Gram 52.50Tolas 9450Grains and 19.6875 Troy Oz.
Nisaab of cash, stock or bonds, other cash assets is the equivalent amount of Gold or Silver. Nisaab is calculated by adding up the cash value of all the assets such as gold, silver, currency etc. and if it is equal TO or in excess of the minimum Nisaab as specified in the above table, the Zakat is due at the rate of 2.5%.
The payment of Zakat is compulsory on the excess wealth or effects which is equal to or exceeds the value of Nisaab, and which is possessed for a full Islamic year. If such wealth decreases during the course of the year and increases again to the value of Nisaab before the end of the year, the Zakat then must be calculated on the full amount that is possessed at the end of the year.
TYPES OF WEALTH ON WHICH ZAKAT IS IMPOSED:
Gold and silver, in any form.
Cash, bank notes, stocks, bonds etc.
Merchandise for business, equal to the value of Nisaab.
Live stock.
On income derived from rental business.
DISTRIBUTION OF ZAKAT:
Zakat should be given as soon as possible after it becomes due.
All of the Zakat can be given to one person or to several persons.
A poor man cannot be paid for his work from Zakat nor can Zakat be given in payment of services, except to the people appointed by the Islamic government to collect Zakat.
Zakat will only be valid if the recipient is made the owner of that amount. If, for example, a few needy persons are fed a meal from Zakat money, then Zakat will not be fulfilled as they were not made owners of the food.
Zakat cannot be given for the construction of Masjid, Madrasah, Hospital, a well, a bridge or any other public amenity.
Zakat can be paid in kind from the same merchandise on which it is due, or alternatively, it could be paid in cash.
TYPES OF WEALTH ON WHICH ZAKAT IS NOT IMPOSED:
On any metals other than gold or silver.
Fixtures and fittings of a shop, car, trucks or any delivery vehicle etc., which is used in running business.
Diamonds, pearls, other precious or semi precious stones which are for personal use.
There is no Zakat on personal residence, household furniture, pots and pan, personal clothing, whether they are in use or not.
There is no Zakat on a person whose liabilities exceed or equal his assets. (Home Mortgage in this country is not to be counted as personal liability for the Zakat purpose).
RECIPIENTS OF ZAKAT:
The recipients of Zakat, according to Quran are as follows: "Alms are for the poor and the needy, and those employed to administer (the funds); for those whose hearts have been (recently) reconciled (to truth); for those in bondage and in debt; and for the wayfarer: (Thus is it) ordained by Allah, and Allah is full of Knowledge and Wisdom." (Quran 9:60)
FUQARA: people who are poor and who possess more than their basic needs but do not possess wealth equal to Nisaab.
MASAKEEN: people who are destitute and extremely needy to the extent they are forced to beg for their daily food rations.
AL-AMILEEN: people appointed by an Islamic Government to collect Zakat.
MU-ALLAFATUL-QULUB: persons who have recently accepted Islam and are in need of basic necessities who would benefit from encouragement by Muslims which would help strengthen their faith.
AR-RIQAAB: slaves who are permitted to work for remuneration and have an agreement from their masters to purchase their freedom on payment of fixed amounts.
AL-GHAARIMEEN: persons who have a debt and do not possess any other wealth or goods with which they could repay that which they owe. It is conditional that this debt was not created for any un-Islamic purpose.
FI-SABILILLAH: persons who have to carry out an obligatory deed which has become obligatory on them and subsequently (due to loss of wealth) are unable to complete that obligation.
IBN-US-SABEEL: persons who are travelers and during the course of their journey do not possess basic necessities, though they are well to do at home. They could be given Zakat in order to fulfill travel needs to return home.
PERSONS WHO CANNOT BE GIVEN ZAKAT:
Zakat cannot be given to the descendants of Muhammad (P.B.U.H);
Zakat cannot be given to parents and grandparents. In the same manner one's children and grandchildren cannot be given Zakat. A husband and wife cannot give Zakat to each other.
VIRTUES OF ZAKAT: Allah says in the Quran: "The parable of those who spend their wealth in the way of Allah is that of a grain of corn. It grows seven ears and each ear has hundred grains. Allah increases manifold to whom He pleases." (Quran 2:261)
It is stated in the Hadith that by giving Zakat the following benefits are derived:
Gain the pleasure of Allah.
Increase in wealth and protection from losses.
Allahs forgiveness and blessings.
Protection from the wrath of Allah and from a bad death.
A shelter on the Day of Judgment;
Security from seventy misfortunes.
THE PUNISHMENT FOR NOT GIVING ZAKAT:
Allah says in the Quran: "And there are those who hoard gold and silver and do not spend it in the way of Allah, announce to them a most grievous penalty (when) on the Day of Judgment heat will be produced out of that wealth in the fire of Hell. Then with it they will be branded on their forehead and their flanks and backs. (It will be said to them) This is the treasure which you hoarded for yourselves, taste then the treasure that you have been hoarding." (Al-Quran 9:34-35)
| Q1. What is Zakat-al-mal, and what is Zakat-al-Fitr? | |
| Zakat-al-Mal is the obligatory charity paid by an individual to the needy. It is obligatory on an individual who possesses wealth equal to or above a minimum amount called Nisab for an entire lunar year. For the purpose of calculating Zakat, different categories of wealth are defined. Nisab for the category of "Personal wealth" is three ounces of gold (or its equivalent amount in money). However, this amount is defined for each type of wealth separately. See under Nisab. Zakat-al-Fitr is a special charity paid to the needy on or before the day of Eid-al-Fitr, which is first day of the month of Shawwal following the month of Ramadan. An individual who is in possession of the Nisab, (three ounces of gold or its equivalent amount), on the day of Eid-al-Fitr pays this Zakat. For Zakat-al-Fitr, one does not need to possess Nisab for the entire lunar year. This is paid as atonement for any shortcomings in the worship of Fasting during the month of Ramadan. This is calculated as a fixed amount per person. An individual pays this on his/her behalf and the dependents. This amount is specified as the cost of one normal meal and therefore it varies based upon the time and place. One may estimate this amount oneself or contact any Islamic scholar or institution for help. | |
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| Q2. What is the definition of Zakat-al-mal (or simply Zakat)? | |
| Literal meaning of the word "Zakat" is cleansing and growth. In keeping with these qualities, Allah has prescribed Zakat as an obligatory charity, as a duty to Allah, upon every wealthy individual. Wealthy individual is defined as one who is in possession of a minimum amount of wealth called Nisab for an entire year. This charity is prescribed in order to cleanse the individual's wealth, heart, and by extension the society in general, of the baser characteristics of miserliness, selfishness, greed, and materialism and replace them with higher qualities of generosity, love and care, and mutual help. Various scholars have defined it more or less in this manner. They have also developed further definition of the amount that constitutes Nisab, categories of wealth, the rate of Zakat that applies to each category of wealth, and the rules of eligibility for receiving assistance from Zakat. | |
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| Q3. What is the position of Zakat in Islam? | |
| Zakat is one of the pillars of Islamic life. It is a duty to Allah that obligates every wealthy individual to share with the needy a portion from his/her wealth. It is a very important institution for the individuals as well as the society in general. This institution aims at not only alleviating the financial hardships of the less privileged in the society through sharing a small part of one's wealth, but also building a society on higher moral and spiritual values. It checks the baser instincts of greed, miserliness, and selfishness, which lead to materialism. It promotes mutual caring, love, and generosity leading to gratitude to Allah. For those who receive assistance from Zakat, it reduces their economic burden and they are enabled to pay attention to the family, social, and spiritual aspects of their lives. Though Zakat is an act of sharing, it is discharged, as a duty to Allah, and in that respect is distinct from an act of normal charity. If there is an Islamic government, Zakat will be collected by the Government and distributed to the needy. In the absence of such an arrangement, this function can be discharged through any voluntary collective effort, for example, through any private organization. Ultimately every individual is personally responsible for discharging this obligation and must take care of this every year. | |
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| Q4. What are the categories of wealth on which Zakat is due? | |
There are, in general, the following categories based upon commonality of either the Nisab or the rate at which Zakat is calculated for different types of wealth. They are: 1. Personal wealth, which includes the following. o Money beyond the normal level needed for everyday expenses, o Gold and silver, o Jewelry (only the gold and silver content), o Stocks, o Profit from business, o Inventory levels in business of unfinished and salable items, o Money held in restricted funds such as retirement funds when they are freed for use. 2. Agricultural produce, which is further classified into the following. o Produce from cultivated land o Produce from non-cultivated land 3. Items that are mined or extracted from the Earth including any buried treasure that is discovered. If this is done as a business, like in mining, and oil, it may be classified along the lines of a business. 4. Live stock, which is further sub-divided into following three categories. o Sheep lamb, and goats o Cows and buffaloes (domestic, not wild) o Camels 5. All other animals There is no Zakat on these animals that are raised as a hobby. If these animals are raised for business, the profit derived from this business will be handled as the profit gained from any other business, viz. As a part of the "Personal wealth" category. There will be no tax on its inventory since its exact count can not be established with certainty. For example, animals in a fish farm. | |
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| Q5. Is personal jewelry to be included in calculating Zakat? | |
| There are different opinions about this. However, the general opinion is that jewelry, whether it is normally in use, or stored for occasional use, must all be included in calculating Zakat. The value of the gold or silver content in the jewelry should be included in the category of "Personal wealth". Precious stones (diamonds, ruby, pearls, etc.) are not to be included neither the labor cost of making the jewelry is to be included. | |
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| Q6. How do we treat money invested in shares of stock for the calculation of Zakat? | |
| Though owning a share of stock of any business is like having a share in the ownership of the business; we have categorized it as "Personal wealth". Therefore, the lower of the value of stock at the beginning and the end of the year should be added in the category of "Personal wealth". This is categorized as "Personal wealth" because of two reasons. 1. For the most people who own stock it is held as a saving with expectations that it will grow in value over time. In fact it is readily traded for money. Considering it as a readily redeemable asset, we have treated it as another form of saving. Therefore, we suggest using its fair market value in calculating Zakat. 2. Calculating Zakat on stock treating it as a share in ownership is normally not very convenient. There are literally millions of shares owned by general public. A stockholder will need to know his/her share of cash on hand, profit, and inventory, in order to use those values in the calculation of Zakat. This information is ordinarily very difficult to obtain, unless it is a partnership of a few people. Therefore, we did not treat stocks as a business partnership. | |
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| Q7. What is the ruling on business wealth (Net profit, investments)? | |
| When one is engaged in business, whatever its nature, one usually invests some money in the purchase of building, furniture, and equipment. Next there is investment in inventory (raw material, or work-in-progress, or finished goods). The inventory on hand is eventually sold and converted into cash. The third element is the net profit (after all expenses and taxes etc. are paid) that the business makes. This net profit flows into the cash that the business holds for further distribution to the owners or for re-investment. There are only two items on which Zakat is paid. 1. The operating cash on hand (or in the bank) and the net profit made during the year (if not already included in cash). 2. The value of inventory at the end of the year These two items are to be included by the owner in the category of "Personal wealth". If there are many owners, the cash on hand, the profit, and the value of inventory shall be apportioned according to their respective shares, and each one will be responsible for the Zakat on ones individual share. This business has to be operating for at least one year. If any share of the business is sold during the year, that share will not be included in the "Personal wealth" of the seller or the buyer because neither of them had it for at least one year. The assets used in the production of wealth (building, furniture, equipment, and even some animals or any other assets) are exempt from Zakat because Zakat is collected from the output from those assets. | |
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| Q8. What is the meaning and definition of Nisab? | |
| Nisab is the minimum amount of wealth owned by an individual for one year that obligates the individual to pay Zakat. This minimum amount of wealth is separately defined for each category of wealth. | |
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| Q9. What are the specified Nisab, (minimum wealth) and the rate of Zakat for each category of wealth? The Nisab and the rate of Zakat for each category are given below. For further details refer to the answer for Question 12. | |
| Category of wealth | Nisab | Rate of Zakat |
| A. Personal wealth | Three (3) ounces of gold or its current value | 2.5% |
| B. Agricultural produce 1. From cultivated land 2. From non-cultivated land | 653 Kg of wheat or its equivalent value. | 1. 5% 2. 10% |
| C. Minerals and Rikaz | 20% | |
| D. Live stock 1. Goat and sheep 2. Cows 3. Camels | 40 goats and/or sheep 30 cows 5 Camels | See tables below |
| Sub Category 1: Sheep, lambs, and goats | |
Nisab: 40 | Zakat |
| Number owned | Zakat in kind |
| 1 to 39 | 0 |
| 40 to 120 | 1 |
| 121 to 200 | 2 |
| 201 to 399 | 3 |
| 400 | 4 |
| Greater than 400 | 4+1 for every 100 above 400 |
| Q10. Who should pay Zakat? | |
Zakat is obligatory on every man or a woman who is an adult, of a sane mind, and satisfies the specified Nisab. This responsibility is to be discharged by each individual based upon his/her situation and value of wealth the individual possesses. | |
| Q11. Are minors, insane persons, and prisoners (who have Nisab) obligated to pay Zakat? | |
Under the condition that they satisfy the Nisab, their guardian should pay Zakat on their behalf. It is incumbent upon that guardian to make sure that the money is growing otherwise the entire amount will be eaten up over a number of years by paying Zakat itself. Various opinions in this regard are: 1. There is no Zakat on the wealth belonging to an orphan (or insane person) 2. The guardian shall keep track of the Zakat owed by the orphan under his care, and provide this information to the orphan's reaching adulthood, and finally let the orphan decide. 3. If the wealth belonging to the orphan is invested in a business and only if it is growing then the guardian should pay Zakat on the profit. If the wealth is not invested or if there is no profit, no Zakat will be paid. 4. It is required of the guardian to pay Zakat on behalf of the orphan. (We have adopted this opinion with a strong recommendation for the guardian to invest orphan's money so it can grow). The above opinions will also apply to an insane person or a prisoner. | |
| Q12. What conditions make Zakat obligatory on any individual? | |
The following conditions obligate payment of Zakat on an individual. | |
| Q13. How do loans affect the obligation of Zakat? | |
In case of a loan, Zakat on the amount loaned to someone is primarily the obligation of the owner of the money, and the obligation is determined based upon the following conditions. a. If the borrower is expected to return the loan in the year in question, the lender (the owner) should include the amount in his calculations. There are two opinions within this, one is that this Zakat shall be paid every year, and the other opinion is that it should be paid for all the years the loan was outstanding upon its return. b. In case the repayment is not expected, there are three possible opinions. i. Once returned, pay Zakat for all years the loan was outstanding. ii. Once returned, pay Zakat that year. iii. Once returned, pay Zakat after one year has passed since the return. c. We favor the opinion that Zakat should be paid by the owner, upon repayment, in the year of repayment. Therefore, if a loan whose return is not expected, should be included if and when the loan is returned. d. The impact of loan on the borrower is already explained in answer concerning conditions that make Zakat obligatory. | |
| Q14. How do we handle amount of money in a provident or retirement fund such as a 401K account? | |
If this amount is available to the individual at any time without any restrictions, then Zakat should be calculated for this amount through the category of "Personal wealth" because its nature will be that of savings. If the plan is restrictive and involves penalty and/or taxes, opinions differ on the payment of Zakat. a. One opinion is that an individual should calculate the amount that is available to an individual after paying an early withdrawal penalty and taxes, and include this remaining amount in the calculation of Zakat as a part of "Personal wealth" category. b. Another opinion is that Zakat should be only paid when the amount is actually received or is available to the individual without any penalty. In that case only taxes due on this amount should be deducted. The net amount after taxes (for the year the amount is completely available to the individual) should be included as a part of the "Personal wealth" category. | |
| Q15. Can Zakat be paid with an equivalent amount of money as opposed to paying in kind? | |
Yes it can be paid in kind or in equivalent amount of money. | |
| Q16. Who is eligible to receive Zakat? | |
The holy Qur'an specifies eight (8) purposes for which the money from Zakat can be used. They are the following. 1) Poor (Faqir pl. Fuqara'): One who cannot support himself/herself, provided (or to the extent) that the recipient of Zakat does not reach the level of Nisab. 2) Needy (Miskin pl. Masakin): One who cannot adequately support himself/herself, and is reluctant to ask for help. Such an individual, therefore, is not easily recognized as someone who needs help. Such an individual is eligible for Zakat, provided (or to the extent) that the recipient of Zakat does not reach the level of Nisab. 3) Those employed to administer the collection, distribution, and administration of Zakat (Al-'Amilin): They need not remain below Nisab at the time of receiving compensation through Zakat. 4) Those individuals who have been recently reconciled to the Truth (Mu'allafat-al-Qulub): This category includes new Muslims, or those who are willing to support the Muslim State but need to be compensated. They could be non-Muslims as well. Such individuals can be in possession of Nisab and will not be disqualified because of that. 5) Freeing of those in bondage (Fi-al-Riqab): Since the custom of bondage or slavery is now extinct, freeing of slaves may not be needed any longer. However, this can be interpreted to include individuals who due to excessive debt do not have any hope of ever standing on their own two feet. 6) Those in debt (Al-Gharimin): Zakat money could be received by on who is in debt in order to pay off the debt or a part thereof provided at the time of receiving Zakat, he/she is not in possession of Nisab. 7) In the cause of Allah (Fi-sabil-Allah): Those who are going out or working in the cause of Allah (including the task of conveying the message of Islam) or in a battle declared by an Islamic State for just cause. Being in possession of Nisab does not disqualify them. 8) The wayfarer (Ibn-al-Sabil): Traveler who is in need of help during his travel. One who belongs to the family of the Prophet (Peace be upon him) is not eligible for receiving Zakat. | |
| Q17. Can relatives receive Zakat? | |
Yes, provided they are not the dependents, such as wife and children, and parents (including ascendants grand parents and descendents such as grand children). Beyond these relatives, in fact it would be preferred that one gives Zakat to one's relatives first. A wealthy wife can give Zakat to her poor husband and not the other way around. | |
| Q18. What is the proper etiquette of paying Zakat | |
Zakat shall be paid with the intention of paying Zakat since it is an act of worship. If an individual declares his/her Zakat in order to encourage others, it is permissible, since this an obligatory act of worship. However, it is not necessary to mention, in fact preferable not to mention, to the recipient that the payment is from Zakat, if it is feared that it would embarrass him/her. | |
| Q19. When should Zakat be paid? | |
Zakat can be paid any time during the year, in one lump sum or in installments. However, at the end of each year one must calculate one's Zakat and the amount due but not paid must be paid. In actual practice, many Muslims prefer to pay Zakat in the month of Ramadan. This is also fine. Bear in mind that for agricultural produce, it is preferred to pay Zakat after the harvest. | |
| Q20. Can Zakat be paid to institutions also? | |
Yes, Zakat can be paid to institutions, which meet the purposes described. | |
| Q21. Is there any charity beyond Zakat? | |
Yes, one may give extra charity beyond Zakat for any good cause, and in fact, charity beyond Zakat is to be encouraged. | |
| Q22. What are the inner dimensions of Zakat? | |
In addition to alleviating the hardships of the needy and the less privileged, this act of worship provides a check against and cleanses individuals, and indeed the society as a whole, of the baser instincts, such as miserliness, selfishness, enmity, exploitation etc. that ultimately lead to materialism. On the other hand, Zakat promotes love, kindness, generosity, and sharing/caring and mutual cooperation. This also promotes relying on Allah, and sincerity in seeking the pleasure of Allah alone, and finally building a society more empathetic and more caring. A lot has been written about the inner dimensions of Zakat. One may refer to many books available on Zakat for further details on this subject. | |
| Q23. How do we know and follow various opinions of scholars or schools of jurisprudence (Madhahib) in calculating Zakat? | |
Indeed there are differences of opinion concerning the definitions of Nisab and the treatment of different categories of wealth. For the sake of providing a comprehensive tool, we have adopted those opinions, which are generally accepted by various scholars, or are easier to apply. However, other major differing opinions are also mentioned in the various answers given under frequently asked questions (FAQs) and the individual is free to follow other opinions if more appealing to him/her. For a greater in depth understanding, of course, one can access many books available on Zakat. | |
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