The following list comprises both FAQs and Common Misconceptions about Zakat and Sadaqah. Questions received from visitors are often summarized and added to this list.
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.
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.
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.
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:
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.
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.
If one has acquired stock in a business with the intention of long term investment, he/she can calculate his/her share of Zakat as a partner in business owning a fraction of the business depending upon the number of shares owned. In this case the owner of stock needs to figure out the percentage of ownership his/her stock represents, and calculate Zakat on the zakatable assets of the business, as explained in the answer to Q7.
1. Conditions for Zakat on investments in business/trade goods:
Trade is defined broadly as exchange with the intention of making a profit. Therefore, whenever the two conditions (1. Goods acquired with the intention of selling, and 2. Goods acquired with the intention of making a profit) are present, Zakat is due. This will apply to all goods if they are acquired for trade and with the intention of making a profit (including live stock, precious stones, real estate, minerals and other materials from earth). If they are not acquired for trade, but they fall under the categories of live stock, agricultural produce, and Rikaz (treasure unearthed), Zakat may become due on them following their individual Nisab and Zakat calculations. However, generally speaking, assets acquired for personal use are not subject to Zakat. The above two conditions for trade goods are in addition to the general conditions that apply to Zakat for non-business personal wealth. See details under Q12 for general conditions for Zakat.
Definition of investments in trade goods:
When one is engaged in business, whatever its nature, one usually invests some money in the purchase of building, furniture, and equipment which take the form of fixed investments that are used and are not “goods for trade”. There is no Zakat on such investments that are intended for use and not for sale. Next, there is the investment in inventory (raw material, or work-in-progress, or finished goods in the case of any business that involves manufacturing or processing) and in some operating cash. These assets are subject to Zakat. During the Zakat year (one lunar year called the Hawl), these ‘trade goods” are sold and result in cash or “receivables” (which eventually gets converted to cash after payments are received from customers). Receivables that are expected to be converted to cash during the Zakat year are also to be included as zakatable assets in calculating Zakat. This also applies to any debts that are expected to be received during the Zakat year. For the general considerations regarding amount loaned to others see answer to Q13. However, any short term payables (for example, amount owed to creditors and suppliers) that are to be paid during the Zakat year, shall be subtracted from the assets before calculating Zakat. The profit generated on the sale is either put back (reinvested) into business and/or is distributed to the owners. The part that is distributed to the owners becomes a part of their individual personal wealth subject to its conditions of zakatability (see answer to Q12).
But the part that is reinvested into business in the form of operating cash, and inventory becomes a part of those assets, and are automatically included in the Zakat calculation. Therefore, Zakat on trade goods is calculated as follows:
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 assets of the seller or the buyer because neither of them had it for at least one year.
Valuation of assets:
General opinion is that the valuation shall be based on the current market prices at the time of paying Zakat since the prices do fluctuate during the year. In addition, the valuation shall be done using wholesale prices and not the retail prices, because if any liquidation of assets is done it will be at the wholesale prices.
Zakat Year for business:
The Zakat year for business is also one lunar year (called Hawl). The zakatable assets as defined above shall be at or above Nisab at the end of the Zakat year.
There is another opinion that the value of zakatable assets shall satisfy Nisab throughout the Zakat year. If the value gets below the value of Nisab, a new Zakat year needs to be started after the value meets the Nisab. However, the practice at the time of the Prophet was to calculate Zakat if at the end of the Zakat year the value of zakatable assets was equal to or higher than Nisab.
Multiple owners:
If there are more than one owner, the net value of assets of the business that are subject to Zakat as explained above, should be apportioned to each owner based on his/her individual share. Then each individual owner is responsible for calculating and paying Zakat on his/her share. This approach is preferred because it may exempt a partner with a small share from paying Zakat. The business may pay Zakat on behalf of all owners if they all are obliged to pay Zakat.
No duplicate payment of Zakat on the same assets:
As a general principle, an item is subject to Zakat (upon satisfying the conditions of zakatability) only once. For example, if a business is paying Zakat on behalf of all owners (assuming that everyone meets the Nisab), then no zakat is required on the proceeds of the business to the owners as a part of their personal wealth.
2. Income generating assets: (Rental income from assets that are rented):
If one is engaged in the business of renting assets for income, there are differences of opinion regarding whether the value of the assets themselves is zakatable or not since they provide growth by producing income or profit. Stronger view is that the value of these assets is not subject to Zakat, but any income derived from the exploitation of these assets is subject to Zakat provided the income received in the Zakat year meets Nisab. There are differences regarding the rate at which Zakat is to be calculated. A modern view is that the rate of Zakat shall be either 10% or 5% on the net income in a Zakat year. This opinion is based on an analogy to the Zakat paid on the agricultural produce. However, the conservative opinion will be to use 2.5% as the general rate of Zakat on the net income from rental property during the Zakat year. We have selected this view for the Zakat calculator.
This will also apply to rental income from any exploited assets, such as, cars, jewelry, animals, etc. If the rental income for a given Zakat year is the only source of sustenance for the owner, a reasonable cost for his/her living expenses including the living expenses of his/her dependents for the year, must be deducted. Then on the remainder amount Zakat shall be calculated, if that amount meets the value 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.
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 |
653 Kg of wheat or its equivalent value. | 1.5% 2.10% |
C. Minerals and Rikaz | 20% | |
D. Live stock
1. Goat and sheep |
40 goats and/or sheep 30 cows 5 Camels |
See tables below |
Following tables give the Zakat for the three sub categories of livestock.
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
|
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.
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:
The above opinions will also apply to an insane person or a prisoner.
The following conditions obligate payment of Zakat on an individual.
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.
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.
If the amount is not fully available, we are of the opinion that the value of the pension plan should not be included in the calculation of Zakat. We have taken the opinion that when it is fully available as in case b above, it should be included in the calculation of Zakat.
Yes it can be paid in kind or in equivalent amount of money.
The holy Qur’an specifies eight (8) purposes for which the money from Zakat can be used. They are the following.
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.
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.
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.
Yes, Zakat can be paid to institutions, which meet the purposes described.
Yes, one may give extra charity beyond Zakat for any good cause, and in fact, charity beyond Zakat is to be encouraged.
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.
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.
Zakat-ul-Fitr is Zakah on the individual. Prophet Muhammad (SAW) is reported to have said:
“Remember Zakat-al-Fitr is essential (Wajib) for every Muslim, man or woman; free or in servitude; adult or child.” (At-Thirmidhi)
Zakat-ul-Fitr or Sadaqat-ul-Fitr is a special charity paid to the needy on or before the day of Eid -ul-Fitr, which is the first day of the month of Shawwal following the month of Ramadan. Zakat-ul-Fitr is paid as atonement for any shortcomings in the worship of Fasting during the month of Ramadan.
On the day of Eid -ul-Fitr, which marks the completion of the month of Ramadan, every Muslim possessing an amount of food in excess of his and his family’s need for a day (24 hours) is mandated to pay Zakat-ul- Fitr on behalf of himself and all his dependent(s).
Zakat-ul-Fitr or Fitrah is “the one full meal per person or cash equivalent to the cost of one full meal, given directly to the needy of the community before Eid-ul-Fitr prayer. Arrangements for paying Fitrah should be made ahead of time so that it reaches the eligible recipients in time for them to make use of it on Eid day. The quantity of Zakat-ul-Fitr traditionally amounts to one Sa`. One Sa` is equivalent to 2751–3800 grams of food such as wheat, barley, rice, or the like. In Greater Chicago the cash equivalent of Fitrah has been determined by Islamic Organizations to be $5.00 – 7.00 for each member of the family.
The categories of people who are eligible to receive Zakat-ul-Fitr are the same as for those who are eligible to receive the regular Zakat.
Sadaqah is an Arabic term widely used to cover all kinds of charity. Although Sadaqah and Zakat are often used interchangeably, Sadaqah voluntary or optional charity.
All good deeds are considered Sadaqah. Every Muslim is exhorted to give Sadaqah. The Prophet Muhammad(S) said:
“Every Muslim has to give Sadaqah.” The people asked: “O Prophet of Allah, what about the one who has nothing?” He(S) replied: “He should work with his hand to give Sadaqah.” They asked: “If he cannot find (work)?” He(S) replied: “He should help the needy who asks for help.” They asked:” If he cannot do that?” He (S) replied: “He should then do good deeds and shun evil, for this will be taken as Sadaqah.” (Sahih al-Bukhari)
Muslims practice Sadaqah and earn rewards from Allah by doing good deeds all their lives. They can continue earning Allah’s rewards even after their death should they leave any of the following legacies behind them. This is called perpetual Sadaqah (Sadaqat-ul-Jariyah). Prophet Muhammad (S) is reported to have said:
“When a person dies (the benefit) of his deeds ends, except three: a continuous Sadaqah, knowledge from which benefit is derived, or a pious child invoking Allah for him.” (Sahih Muslim & Ahmad)
Etiquette of Giving Sadaqah
The taxes are paid to the government – Federal, State, County, and City in accordance with its rule and regulations. Zakat is paid as an obligatory duty (Faridatun min Allah) to Allah. It has its own purpose, function, rules, and regulations of payment and distribution. In order to have the Zakat obligation to be fulfilled, it must meet the (Shariah) requirements. Paying taxes do not meet these requirements.
Any unpaid Zakat will be counted as missed obligation (Qada). You should estimate the amount of Zakat due on you for the years you missed and pay it as soon as
It is a wife’s individual responsibility to pay Zakat on her jewelry, zakatable possession, and wealth. If her husband or someone else pays Zakat on her behalf with her permission, it is permissible and he will be rewarded for this voluntary action.
It is prefered to pay Zakat to your poor relatives – sisters, brothers, cousins, nephews, nieces, uncles, aunts, etc. Prophet Muhammad (S) said: “Charity given to the poor is charity, and charity given to a relative is charity and upholding of family ties.” (Ahmad, Al- Nisa’i).
Zakat should not be given to one’s parents, grand parents, children, grand children, or wives. The care of these relatives is a duty enjoined by Shariah on every Muslim.
The items of one’s basic needs and necessities are exempted from Zakat. All items of value (movable and immovable), that are designated for personal and household use and/consumption are non-Zakatable.
Example: Food, clothing, residential home, petty cash, personal transportation (automobile, riding animal), Books for personal study, domestic animals and poultry for domestic needs, tools of one’s personal trade/profession, articles of adornment in day to day use,, arms and ammunition for personal use, agricultural land cultivated by the owner, etc.).
We should calculate Zakat properly and meticulously. It is the obligatory duty to Allah (Fardh minAllah). If you happen to find out that you have underpaid the zakat, you make the intention of paying due zakat and make up for the underpayment. Allah will accept it as “Ada” of your obligation (Fardh).
Zakat can be paid as cash/Check/Draft/Credit Card*, and the like. It can also be paid in kind with gold, silver, grain, livestock, etc.
*Credit Card – it is important that you pay your credit card company on time so as not to incur any interest payments.
Yes, Zakat will be due on the minimum balance in the bank over the period of one lunar year (Haul – it is approximately 355 days), provided the balance did not go under the amount of Nisab.