Zakat

ZAKAT

1. Nisab ▪️ 2. Zakat Year▪️ 3. Zakat On Businesses ▪️4. Loans and Debts ▪️5. Aqiqah ▪️6. Zakat al-Fitr▪️7. Recipients of Zakat ▪️8. Zakat Calculator

1. NISAB

➖To determine the nisab, there are two measures: EITHER gold OR silver.

• Gold: The Nisab by the gold standard is 3 ounces of gold (87.48 grammes) or its cash equivalent.

• Silver: The Nisab by the silver standard is 21 ounces of silver (612.36 grammes) or its equivalent in cash.

Example: In 1423 AH, Suraya’s zakatable wealth came to only $200. She owes no zakat. The next year was better for her, and she now owns $2,500 in zakatable wealth. She will be liable for zakat after the money has been in her possession for a lunar year.

➖Should I use the gold or silver nisab?

The nisab calculated with the silver standard is significantly lower than its gold counterpart. This is because the value of silver has plummeted since the time of the Prophet (peace be upon him).

There are arguments for using either nisab value. Many scholars say that it is better to use the silver nisab since it will increase the amount of charity distributed; others say that the gold nisab is closer to the nisab in use at the time of the blessed Prophet (peace be upon him).

However, if your assets consist entirely of gold, you must use the gold nisab, and similarly, if they consist entirely of silver then the silver nisab must be used.

➖My wealth decreased below the nisab for a few months during the year, do I still pay zakat?

As long as you are in possession of wealth above the nisab threshold at the beginning and end of the zakat year, zakat will be payable, even if your wealth dipped below the nisab for most of the year.

➖I have more money than the nisab, but I need it for my living expenses.

If a person possesses wealth exceeding the nisab threshold, but has to pay rent, purchase food, clothing, etc., for themselves and their dependants, then these costs may be deducted from one’s wealth.

If after deducting these costs, his remaining wealth is less than the nisab then no zakat is payable.

➖When does the zakat year begin?

The zakat year begins on the date on which you were first in possessions of wealth above the nisab.

This will be your seed date, whenever it comes around you will have to calculate zakat, irrespective of any fluctuations in the amount of wealth in your possession.

The only situation in which your seed date will change is if you were to become totally bankrupt and lose all your assets and belongings. In this situation, your new seed date will begin when you are once again in possession of wealth above the nisab.

If you are not sure of your seed date, then estimate it to the best of your ability.

2. ZAKAT YEAR

➖When Does The Zakat Year Begin?

The zakat year begins on the date on which you were first in possession of wealth above the nisab.

This will be your seed date, whenever it comes around you will have to calculate zakat, irrespective of any fluctuations in the amount of wealth in your possession.

The only situation in which your seed date will change is if you were to become totally bankrupt and lose all of your assets and belongings. In this situation, your new seed date will begin when you are once again in possession of wealth above the nisab.

If you are unsure of your seed date, then estimate it to the best of your ability.

Example: On Junaid’s 18th birthday he is given a gift of £1,000. This is the first time he has owned wealth over the nisab threshold, so his zakat year begins on his birthday. Junaid calculates the equivalent date according to the lunar calendar, and every year this date comes around, he calculates his zakat.

➖My wealth decreased below the nisab for a few months during the year, do I still pay zakat?

As long as you are in possession of wealth above the Nisab threshold at the beginning and end of the zakat year, zakat will be payable, even if your wealth dipped below the nisab for most of the year.

➖I earned a large amount of cash a few days before the zakat year was up, do I pay zakat on this amount now, or after a year has passed from when I received it?

You pay zakat when the zakat year has elapsed, irrespective of when particular portions of your wealth came into your possession. Even if the cash came into your possession a day before the zakat year had elapsed, you would have to pay zakat on it the following day.

3. ZAKAT ON BUSINESSES

➖I have my own business, how do I pay zakat on it?

If you have a business, all stock in trade is liable for zakat, including land and real estate that has been bought for the purpose of resale.

Raw materials and goods produced for sale are also subject to zakat. The buildings, machinery, vehicles and so on that are essential for the business are exempt from zakat.

Example: Amir owns a biscuit factory. When calculating the zakat that the business owes, he takes into account the monetary value of all the biscuit ingredients he has in stock and all the unsold biscuits stored in storage. The factory building, machinery and equipment are not taken into account when calculating zakat.

➖I have my own business, how do I pay zakat on it?

If you have a business, all stock in trade is liable for zakat, including land and real estate that has been bought for the purpose of resale.

Raw materials and goods produced for sale are also subject to zakat. The buildings, machinery, vehicles and so on that are essential for the business are exempt from zakat.

➖How do I calculate the value of stock in my shop?

The value of the stock in your shop is its market value, not the buying price. You can calculate this by estimating how much you would expect to receive if you sold the entire stock at once to a single buyer.

➖I have ‘dead stock’ in my shop that I have not been able to sell for many years, do I still pay zakat on it?

Yes, you would need to pay zakat on it. Although when calculating its value, you would consider the price that you would be able to sell it for.

➖I have taken out large commercial loans to expand my business, how will this affect my zakat calculation?

A loan you have taken out to acquire zakatable assets, such as raw materials, goods and so on, can be deducted from your capital. You pay zakat on what remains.

A loan you have taken out to acquire non-zakatable assets, such as furniture, machinery and buildings is not deductible.

4. LOANS AND DEBTS

➖I have debts. Do I pay zakat? 

The basic principle is that debts are deducted from wealth, and if the remainder is still above the nisab threshold, zakat is payable, otherwise not.

However, if a person has a large debt that is being paid off in instalments, such as a mortgage or large credit card debt, then one should only deduct the payment that is currently due from one’s assets.

Example:

Zubair possesses assets worth £10,000, but owes his creditors a total of £7,000. When his zakat year has elapsed, he will pay zakat on £3,000.

Shuayb has savings of £2,000, and an £80,000 mortgage which he pays in monthly instalments of £400. His zakat date comes round just as his monthly payment is due, so he pays zakat on £1,600.

➖I lent money to someone, do I pay zakat on it?

Yes. You can either pay zakat for every year that passes until you receive the loan back, alternatively you can wait until you receive the loan and then pay the accumulated zakat in one go.

If the loan is insecure and you are not sure whether the borrower will be able to pay you back, it is better to delay the zakat payment until you receive it, at which point the zakat accumulated over the years will be payable. If you never receive the money back, no zakat is payable.

➖Someone owes me money for work I did for him, do I pay zakat on it?

No zakat is payable on money you are owed for work done until you receive the payment.

Similarly, zakat is not payable on a dowry that you have not yet received, or an inheritance share that you are due but has not come into your possession.

➖Do I pay zakat on my pension fund?

There are two ways in which a pension can be funded:
1) Payments are deducted from a salary before it comes into the possession of the contributor.
2) The contributor makes payments from money that has already come into his possession.

➖I have taken out large commercial loans to expand my business, how will this affect my zakat calculation?

A loan you have taken out to acquire zakatable assets, such as raw materials, goods and so on, can be deducted from your capital. You pay zakat on what remains.

A loan you have taken out to acquire non-zakatable assets, such as furniture, machinery and buildings are not deductible.

➖I saved some money for hajj. Do I pay zakat on it?

Yes, zakat is payable on money saved for hajj, provided it is kept for one lunar year, and your total wealth meets the nisab threshold.

➖I have some shares. How do I calculate what zakat I owe?

Shares are of two types: those purchased by a speculator who trades in shares, and those bought for investment.

If you are a speculator and have bought shares specifically for the purpose of selling them and making a profit, then the entire market value of the shares is subject to zakat since it is considered as stock in trade.

If, however, you have bought shares as an investment and to receive dividends, then calculate the percentage of zakatable assets the company has, then pay zakat on that percentage of the value of your shares.

To do this you would need to look at the yearly accounts of the company, and work out what percentage of its assets are stock, raw materials, cash, gold or other zakatable items. Buildings, machinery, vehicles and so on that are essential for the business are not zakatable.

5. AQIQAH

Donate your Aqiqah with Islamic Relief
When a child is born, it is a sunnah of the Prophet Muhammad (peace be upon him) to sacrifice livestock and divide the meat between friends and relatives, as well as to community members in need. This is called Aqiqah, and it is a virtuous act in Islam.

The Prophet Muhammad (peace be upon him) gave an Aqiqah to his 2 beloved grandsons, Imam al-Hasan and Imam al-Husain (peace be upon them).

Aisha (RA) narrated that the Prophet ﷺ said:

“Slaughter two comparable sheep for a male newborn and one sheep for a female.” [Tirmidhi]

6. ZAKAT AL FITR (FITRANA)

➖What is Zakat ul Fitr (Fitrana)?

Zakat ul Fitr (also known as Fitrana) is a charitable donation of food that must be given before Eid prayer, before the end of the month of Ramadan, for the love of Allah. Zakat ul-Fitr is compulsory upon every self-supporting adult Muslim who has food in excess of their needs, on behalf of themselves and their dependants.

Ibn `Abbas (may Allah be pleased with him) reported:

“The Messenger of Allah (peace be upon him) ordained Zakat ul Fitr [Fitrana] to purify the fasting person from indecent words or actions, and to provide food for the needy. It is accepted as Zakat for the person who gives it before the Eid prayer; but it is a mere Sadaqah for the one who gives it after the prayer.” [Abu Dawud and Ibn Majah]

The quantity is described by the Prophet (PBUH) as one saa’ of food, and one saa’ is equivalent to four madd. A madd is the amount that can be scooped up when one puts their hands together. If we translate this into a monetary value based on the price of a staple food such as flour or rice, it is approximately $5. Therefore the amount due for each person is $5.

➖How much is Fitrana (Zakat ul Fitr) per person?

At the time of the Prophet (PBUH) Fitrana (Zakat ul Fitr) would be given as one saa’. Therefore the quantity is described by Prophet (PBUH) as one saa’ of food (one saa’ is equivalent to four madd). A madd is the amount that can be scooped up when one puts their hands together.

➖Who is it obligatory on to pay Fitrana (Zakat ul Fitr)?

Any Muslim who has food in excess of their needs must pay Zakat ul Fitr (Fitrana). Unlike Zakat, it is a duty on everyone in your household.

Therefore, the head of the household, or parents and guardians, can pay on behalf of other members of the family.

➖What is Eid Fitrana?

Fitrana, sometimes referred to as Eid Fitrana or Sadaqatul Fitr, is a charitable donation that must be given before the Eid al Fitr prayer. Therefore it must be given before the end of the month of Ramadan.

➖What is Sadaqatul Fitr?

Sadaqatul Fitr is an alternative name for Fitrana or Zakat ul Fitr.

➖What is Fitrana (Zakat ul Fitr), and why is it paid?

Fitrana (Zakat ul Fitr) is incumbent on every Muslim who possesses one saa’ of food which is not needed as a basic necessity for themselves self or their family for the duration of one day and night.

The quantity is described by Prophet (PBUH) as one saa’ of food. One saa’ is equivalent to four madd.  A madd is the amount that can be scooped up when one puts their hands together.

Ibn `Abbas (may Allah be pleased with him) reported:

“The Messenger of Allah (peace be upon him) ordained Zakat ul Fitr to purify the fasting person from indecent words or actions, and to provide food for the needy. It is accepted as Zakat for the person who gives it before the Eid prayer; but it is a mere Sadaqah for the one who gives it after the prayer.” [Abu Dawud and Ibn Majah]

➖When should Fitrana (Zakat ul Fitr) be paid?

Fitrana (Zakat ul Fitr) must be paid within the month of Ramadan. The latest it can be paid is before the Eid prayer begins so that those in need can benefit in time for Eid.

Ibn Abbas narrates:

“It is accepted as Zakat for the person who gives it before the Eid prayer; but it is a mere Sadaqah for the one who gives it after the prayer.” [Abu Dawud]

➖Do children have to pay?

It is compulsory for every member of a household including children and babies to pay Zakat ul Fitr (Fitrana). However, parents/guardians may pay on behalf of their children/dependents.

➖Who are the recipients of Fitrana?

The majority of scholars hold the opinion that only the first two categories of the recipients of Zakat can receive Fitrana.

➖Can I pay Fitrana (Zakat ul Fitr) late if I forget?

One of the conditions of Fitrana (Zakat ul Fitr) is that it must be paid before the Eid prayer. However, if paid after it will be treated as Sadaqah, therefore the reward will be lesser.

➖Can you take Fitrana before the 27th of Ramadan?

Yes you can, according to the Hanafi Madh-hab. The Shafi’i Madh-hab also follows follows this ruling.

7. RECIPIENTS OF ZAKAT

➖Who can receive my zakat?

To be eligible to receive zakat, the recipient must be poor and/or needy. A poor person is someone whose property, in excess of his basic requirements, does not reach the nisab threshold.

The recipient must not belong to your immediate family; your spouse, children, parents and grandparents cannot receive your zakat. Other relatives, however, can receive your zakat.

The recipient must not be a Hashimi, a descendant of the Prophet (peace be upon him).

Example: Ahmed owns only £50. However he also owns two cars, one is in excess of his basic needs. To find out if Ahmed is eligible to receive zakat, the value of his second car will have to be taken into account.

➖Do I have to pay zakat?

Zakat is obligatory on someone who is:

1.A free man or woman: A slave does not have to pay zakat.

2.A Muslim. Zakat is a religious obligation upon Muslims, like the five daily prayers.

3.Sane: The person on whom zakat becomes obligatory must be of sound mind according to Imam Abu Hanifa. Imam Malik holds that an insane person is still liable for zakat.

4.An adult: Children do not have to pay zakat, even if they own enough wealth to make zakat obligatory. However, both Imam Shafi’i and Imam Malik say that the guardians of the children should pay the zakat on their behalf.

5.In complete ownership and control of their wealth: The person must own and be in possession of the wealth, and also be free to spend or dispose of the wealth in any manner they like. If a person has made a loan of their wealth then they are not in a position to spend it until it is repaid.

6.In possession of wealth above the nisab threshold: The person should possess wealth above a defined amount required to satisfy the essential needs of themselves and their dependents (nisab).

7.Free from debt: Someone in debt may deduct his debts from his assets, if what remains is still above the nisab threshold, zakat is due, otherwise not.

8.In possession of the wealth for one complete lunar (Hijrah) year: If one owns zakatable wealth for a lunar year, zakat will become obligatory, provided the total amount of wealth exceeds the nisab at the beginning of the year and the end, irrespective of any fluctuations in the months between.

➖I gave a lot of money to charity over the year, doesn’t that count as zakat?

For a donation to qualify as zakat, there must be a clear intention present, either when you separate the zakat money from the rest of your wealth, or when you make the zakat payment.

➖What part of my wealth is ‘zakatable’?

Gold and Silver: Any gold or silver you possess is zakatable, including jewellery according to Hanafi school, because these two metals have intrinsic monetary value.

Other precious metals and stones are not zakatable unless they were acquired for the purpose of trade.

Cash or its Equivalent: Cash at home, in bank accounts, savings, money lent to others,saving certificates, bonds, shares, investment certificates and so on, are all taken into account when calculating zakat.

Stock Purchased for Trade: Any goods you have bought with the intention of selling are included in your zakatable wealth.

➖What part of my wealth is not zakatable?

Any goods, other than gold or silver, that you have not bought for resale are non-zakatable. No zakat is payable on your personal belongings, such us a house or a car.

➖Can I pay zakat in advance?

Yes, zakat can be paid in advance before the year has ended, but you should make sure you have wealth equal to or above the nisab.

➖Do I pay zakat on wealth belonging to my children?

Not according to the Hanafi school. A child is not liable to pay zakat, even if in possession of wealth above the nisab threshold. For a child who possesses the nisab or more, the first zakat payment will become due twelve lunar months reaching the age of puberty.

According to both Imam Shafi’ and Imam Malik however, a child who possesses wealth above the nisab value is liable for zakat.

8. ZAKAT CALCULATOR

Calculate Zakat on cash, savings, gold, silver and property.

We have broken down the calculation process into zakatable assets (gold, silver, cash, savings, business assets etc.) and deductible liabilities (money you owe, other outgoings due) so you can calculate the zakat you owe easily.

The amount of zakat you need to pay will be determined once you have calculated the value of your net assets. You then need to see whether your net assets are equal to, or exceed, the Nisab threshold.

Calculate the way given below:

▪️Nisab: Value of gold, Value of silver
▪️Cash: In hand and in bank accounts
▪️Deposited for some future purpose, e.g. Hajj
▪️Given out in loans
▪️Business investments, shares, saving certificates, pensions funded by money in one’s possession
▪️Trade goods: Value of stock
▪️Liabilities: Borrowed money, goods bought on credit
▪️Wages due to employees
▪️Taxes, rent, utility bills due immediately

ZAKAT

1. Nisab ▪️ 2. Zakat Year▪️ 3. Zakat On Businesses ▪️4. Loans and Debts ▪️5. Aqiqah ▪️6. Zakat al-Fitr▪️7. Recipients of Zakat ▪️8. Zakat Calculator