Zakat is second foundation pillar out of the five basic pillars of Islam among Faith in Allah Almighty, Daily Prayers, Fasting in the month of Ramzan & Hajj.
Zakat was made obligatory in 2nd year of Hijrah. It is mentioned 32 times in Quran-e-Kareem of which 22 times along with that of Namaz. Zakat means ‘something that purifies‘ and as per Islamic concept & logic, Zakat purifies our wealth, property, business, earnings and belongings. Islam strictly advocates the philanthropist side of society & well being of all members of it, Zakat is individual’s contribution to the society.
In layman’s terms Zakat is giving 2.5% of what you take from society in savings, earnings, investments, excess of your needs back to it. Zakat is the strongest philanthropist tool in any society. It addresses the core issue of distrust in any society: uneven distribution of wealth. When Rich takes a portion out of their wealth and gives it to the poor, things will automatically get better, morally as well as economically and balance in society will maintain. Zakat is payable on following different heads with varying proportions:
- Goods for Sale
Importance of Zakat:
Zakat is second pillar (foundation stone) of Islam. It is ordered 32 times in Quran and in countless Ahadees. Quran teaches us to purify our earnings & savings by taking out zakat. Quran also warns, those who don’t pay zakat and keep their belongings closer, of painful torment.
Who Should Pay Zakat:
As per Islamic concept, ‘sahib-e-nisab’ should pay zakat. Sahib-e-Nisab is anyone having minimum prescribed amount or quantity of Gold, Silver, property or unsold goods. Generally, 7.5 tola Gold or 52.5 tola silver is threshold for Zakat. Government of Pakistan sets yearly nisab to ascertain Sahib-e-nisab, which for this year 2019 is set at Rs. 44,415. So, anyone having Gold, Silver, Cash, property worth Rs. 44,415 are sahib-e-nisab and obligated to pay zakat.
When is Zakat Obligated
For the very first time, to become sahib-e-nisab, a minimum of one year should have passed on nisab (belongings). Once you’ve become sahib-e-nisab, Zakat will be deducted to whatever sum you have on the day of calculation. For example, Mr. A became sahib-e-nisab on 1st Ramazan year 1 and his total worth was 1 lakh, he earned 10 Million throughout the year and 2 days before Ramazan, he made a payment of 8.5 Million, hence on first Ramazan year 2 his net worth will be 1.5 Million and Zakat will be calculated on 1.5 Million (assuming Mr. A didn’t have any gold, Silver, cash or property etc.)
How to calculate
It is very important to calculate Zakat and estimate total value correctly. For simpler cases, Zakat can be easily calculated in following steps, for complex scenarios there are many Zakat calculators available on internet. for example, I use this zakat_calculator for past few years. I don’t know whom to give credit to. Conceptually,
Zakat Amount = A + B + C + D +E – F
A) Gold quantity in gram * Today’s value * 2.5%
B) Silver quantity in gram * Today’s value*2.5%
C)Quantity of precious stones (diamond, rubies etc)*value*2.5%
D) Amount in Cash / Bank / Pay Order / Investments / Property Value * 2.5%
E) Value of Saleable Stock / Amount Receivable / Bonds / Provident Fund*2.5%
F) Liabilities / Loans / Amount Payable*2.5%
Points to Ponder
- Zakat is only deductible on excess cash / savings, Gold, Silver, property etc. E.g. if you have a plot purchased with intent of building a home someday and live, it will be exempted from Zakat.
- If Zakat amount is more than value of Nisab fixed for the year, full amount cannot be given to one person. For example, Mr. A’s payavle zakat amount is 540,000 and nisab for the year is Rs. 44,000. If Mr. A donate full amount of zakat to one person only his net worth will become more than nisab value hence he will not be entitled to receive Zakat. In such cases, amount should be divided among more persons so their net worth remains lesser than nisab value.
- A common misconception is that Zakat will not be calculated for Gold / Silver jewelry in use, which is not correct. Zakat will be calculated on complete quantity of Gold / Silver regardless if it is in use or not.
- Zakat will be calculated on amount receivable (if amount is received after 2-3 years, owner has to pay Zakat for all these years)
- Zakat can be paid in installments (e.g. if your total Zakat is Rs. 10,000 you can pay on monthly, quarterly or semiannually basis as deem easy)
- For individuals, personal loans / liabilities to be deducted from overall value
- For loan based business setups, only amount used for purchase of saleable items / supplies will be deducted
Whom Should You Pay Zakat To
Zakat can only be paid to deserving people who do not have sources to make ends meet. In conceptual terms, those whose net worth is less than nisab fixed for that year and do not posses any Gold or silver or any valuable items. It is obligatory on sahib-e-nisab to fully investigate if receiver of Zakat is deserving person or not. It is equally important to ensure that whom you give Zakat doesn’t have any Gold, Silver or Cash or property on any other belongings else Zakat obligation is not fulfilled. Priority should be given to relatives, extended family, neighbors, neighborhood, city mates etc.
As per teachings of Quran, Zakat can be given to following 8 types of people:
- Poor (Fuqara) – Who doesn’t have any belongings and survive on Sadaqat & Zakat
- Needy (Masakin) – Who are in dire need of support at time being
- Newly Converted Muslim – Newly converts who are abandoned by family & society
- To Free Someone from Captivity – Like Ghulams in old days etc
- Debtors (Gharimin) – People under debt and can’t pay on their own unless supported
- In Allah’s Way (Fi Sabeel Lillah) – Spend Zakat in Allah swt’s way like Tableegh & Jihad
- Wayfares (Travelers) – To travelers who are wandering and have nothing on them
- Zakat Collectors – who are authorized to collect and spend it on deserving ones
Points to Ponder
- Zakat cannot be paid to blood relatives i.e. Father, Mother, Son, Daughter etc and Syed’s (descendants of Prophet Muhammad (PBUH) & Hazrat Ali (RA)’s family)
- Zakat can only be paid to an individual who is deserving and doesn’t fall under the definition of sahib-e-nisab.
- Zakat cannot, in any way, be paid to an institution run by sahib-e-nisab or any community service project as it will be used by everyone including sahib-e-nisab
- Proper investigation prior to giving Zakat is obligatory on Zakat giver’s part
I am not a certified aalim or mufti, just compiling commonly known concepts about Zakat like Who should pay, how to calculate, and whom to give just to make it easy & understandable for public. My information is based on lectures in local mosque & YouTube and few books on the subject. For detailed information about the topic here’s link to Mufti Taqi Usmani’s book: Zakat Kis Tarah Ada Kren.
Verses of Holy Quran on topic of Zakat, here at the end of this blog-post.