Zakat is ordained to Muslims by Allah and is therefore seen as an important obligation. Zakat is set as one of the five pillars of Islam with the aim of achieving spiritual and financial reform. Zakat is an important element of Islam as it promotes the elimination of greed and helps to consolidate the economy in Islamically ethical terms.
Zakat is seen as an act of worship rather than charity, and the benefits are therefore weighted in favour of the giver rather than the receiver. Zakat is a means to purify wealth but also relates to spiritual purification.
In order to be liable to pay zakat, your wealth must be above a set threshold figure and this figure is known as the 'nisab'. Once you have savings that reach nisab then zakat is payable at a rate of 2.5% on all applicable assets that include gold, silver, cash, shares, and income from properties (but not your main residence). Once you have worked out how much zakat you owe you should then donate this sum to charity.
Zakat is calculated and payable on the following:
Muslims do not have to pay zakat on any belongings that are for personal use such as the property you live in or your car. If you have any assets mentioned in the list above then you should be calculating your zakat using the zakat calculator. Most people donate their zakat to charities that work with orphans or vulnerable people.
As mentioned above, nisab is the set minimum amount above which zakat becomes payable. The nisab is mostly determined on the basis of the current value of gold and silver. The Prophet Muhammad (SAW) set the nisab at a rate that is equivalent to 612.36 grams of silver, and 87.48 grams of gold.
In today's world, gold and silver are not really used as a form of currency as they were in the past. This means that Muslims need to ascertain an equivalent monetary exchange value using the rates set by the Prophet Muhammad (SAW). The best way to find out the equivalent monetary exchange value is to check the current market rate of gold and silver.
As mentioned above, once you have ascertained the correct rate you are then obliged to assess your applicable belongings including gold, silver, cash, shares and income generating properties and work out how much zakat is payable.
When it comes to paying zakat, then it is safe to say that zakat should be used to eliminate poverty, and ensure that those with wealth above a certain threshold have a duty to donate it to worthy causes. Ramadan is a hugely popular time for the payment of zakat, but zakat can be paid at any time in the year, and many zakat fundraisers run throughout the Islamic calendar.
Zakat is payable once a year, and payment of zakat should not be delayed. Many Muslims like to pay their zakat once the moon has been sighted for Ramadan as the reward is increased.
In order to accurately calculate your zakat you need to know the correct price for gold and silver, or more simply you can use the zakat calculator. An example of how zakat is calculated on gold/silver is as follows:
If the price of gold today is £50 a gram, then the nisab would be 50 x 87.48, totalling 4,374. If you find you have £4,374.00 or more in wealth, savings and belongings then you have an obligation to pay zakat. The amount of zakat payable would be 2.5% of your total wealth, but you are allowed to deduct expenses.
If the price of silver were £10 per gram then the nisab would be 10 x 612.36, totalling 6,123.60. As outlined above, if you have wealth, savings and assets in excess of £6,123.60 then zakat becomes payable.
Many Muslims choose to ascertain the nisab threshold using the value of silver because this facilitates a larger donation that can then be used to help poorer communities with things such as clean water, flood relief, education, elimination of poverty and support.
Please note that the prices information and values mentioned above are for example purposes only. For an accurate figure of the zakat you are liable to pay then it is always best to use the zakat calculator, and also conduct your own research and obtain qualified advice where required.
Qardus do not offer financial or tax advice and if advice is needed, this should be sought from a qualified professional.
There are eight groups of people to whom zakat can be given:
Recipients of zakat should not be members of your immediate family such as your spouse, parents or children. Other non-immediate relatives can be recipients of your zakat payments.
Many people give to charity throughout the year, for any donation to qualify as fulfilment of the zakat obligation, then there must be an intention to give the money as zakat.