• In The Name Of Allah, The Most Beneficent, The Most Merciful

Q12. What conditions make Zakat obligatory on any individual?

The following conditions obligate payment of Zakat on an individual.

  1. Complete ownership
    1. If one has given his property in a public trust Zakat is not payable by that individual. But if it is a trust in the name of specific individuals, those individuals are required to include their share in the calculation of their Zakat. In the case of a “Living trust” (in the United State) where the person establishing the trust keeps complete ownership and control of the trust until his death, he will be responsible also for any Zakat that is due. Upon his death, the beneficiaries who will inherit will be responsible for any Zakat that becomes due if they own it for one full year.
    2. Also borrowed wealth is exempt because borrower is not the owner. See answer to the general question (Q13) relating to loans.
    3. For the same reason there is no Zakat on wealth acquired illegally (in a Haram – forbidden way). For example, stolen wealth does not belong to the thief.
  2. Wealth shall be of the potentially growing kind
    1. If it is naturally growing kind (Example – Live stock) Zakat is required.
    2. If it is not growing because of its nature, or due to reasons beyond one’s control, no Zakat is required.
    3. If it is not growing because of negligence or mismanagement, Zakat is required.
  3. Should satisfy Nisab. It should be above the minimum level specified under category of wealth.
    1. For the category of “Personal wealth”, and of Live stock the individual shall be in possession of Nisab for one whole lunar year.
    2. For the category of Agricultural produce, there is no holding period of one lunar year required. As soon as the crop is harvested the Zakat should be calculated and paid. If there are multiple crops in a year, Zakat shall be paid each time, provided, of course, that the quantity of Nisab is satisfied. It should be remembered that Zakat is paid on agricultural produce that can be stored over time. In other words, there is no Zakat on perishable agricultural produce. Imam Abu Hanifa has an opinion that there is no Nisab for agricultural produce. However, other scholars have defined it based upon the prescribed Nisab at the time of Prophet Muhammad (Peace be upon him). This Nisab was five (5) Wasaq. Wasaq was a volumetric measure. A Wasaq was equal to 60 measures of a Sa’. Since present day normal measure for grain has changed to a measure of weight (such as a Kilogram), scholars have tried to define it in terms of weight of wheat of an average size. Yusuf Al-Qarzawi has calculated it to be six hundred and fifty three (653) Kg of wheat. However, what is used in India and Pakistan amounts to double the quantity around (1000) Kg. We have taken the approach of (653) Kg of wheat or its value as the Nisab for agricultural produce. Therefore, one should estimate the value of the grain and compare it with the value of (653) Kg of wheat. If the value of produce exceeds the value of (653) Kg of wheat, the Nisab is satisfied and Zakat should be calculated on the total value of the produce less any loans and expenses that were incurred in the process of producing and are payable after a harvest. An important consideration is that if this is the only source of income for the farmer for his and his dependents needs, a deduction is allowed. Scholars have determined that, a third or a fourth of the produce as the amount that should be left for the farmer. The rate of Zakat for agricultural produce (after loans and expenses are subtracted) is 10% or 5% depending upon if the produce is from non-cultivated land or cultivated land respectively. The preferred way of paying Zakat on agricultural produce is to pay in terms of the produce itself; however, to pay in monetary terms is also acceptable. Nisab defined in terms of value of (653) Kg of wheat is very helpful in case of very expensive crop (for example Saffron) for which the value of 653 Kg (of Saffron) will be excessive and unfair as Nisab. Another point to remember is that the grain or fruit in its dried and storable condition is what is used for estimating Nisab and Zakat. Grapes will be measured, for example, through the value of raisins rather than the weight or volume of the raw produce.
    3. For the category of Rikaz (all items mined out of the Earth including oil or other valuable fluid items, and old buried treasures that are discovered), there are various opinions. One opinion suggests that there is no Nisab. According to this opinion, any time anything is extracted from the Earth, Zakat needs to be calculated on the amount extracted. The other opinion is that its value should equal the Nisab on gold or silver, namely three ounces of gold, before Zakat becomes obligatory. It must be noted that in the case of minerals there may be other regulations enacted by the State, which may have to be complied with. The question of Zakat applies only to the portion that is clearly under the ownership and possession of the individual calculating Zakat. The question of the hold period of one lunar year is also not applicable to this category.
      We have taken the position that there is no Nisab on the category of Rikaz, and that the Zakat on it is 20%, calculated on the amount that is clearly and personally owned by the individual. No expenses need be deducted from Rikaz.
    4. If this is an on-going business, we leave to the individual the choice of treating the minerals, including valuable fluids extracted from the Earth, as personal wealth or proceeds from business, and including it in the category of “Personal wealth”. In that case the Nisab of three ounces of gold and a rate of Zakat of 2.5% will apply. However, for one-time acquisitions, for example, the recovery of buried treasures there will be no Nisab and the rate of Zakat will be 20%.
  4. Wealth in question shall be that beyond the normal needs of the individual and his/her dependents. If the amount in savings is for the normal expenses, it should not be included in the calculation.
  5. The individual should not be in debt. If the individual is in debt that is not serviceable from his normal income and the only way that individual can repay his/her loans is by disposing of some or all of his assets the amount owed should be subtracted from the total value of his/her “Personal wealth” and the remaining amount evaluated to see if it meets the Nisab in that category. If it does, Zakat should be calculated upon the net value (total amount less loans). On the other hand, if loans are serviceable from the ongoing income (such as in case of regular mortgage payments or an installment loan), the unpaid loan should not be subtracted from the assets unless the individual plans to pay the loan off that year from his/her wealth.
  6. Similar treatment will apply to loans that were incurred for agriculture which are normally payable upon a successful harvest. They should be subtracted before the agricultural produce is evaluated for Nisab and Zakat. In addition, any other expenses incurred in generating agricultural produce, should be subtracted, before deciding whether the requirements of Nisab are satisfied or not. Like in the case of a business, investments made or instruments used in the case of agricultural produce are not included in calculating Zakat.