Zakat: One of the Five Pillars of Islam

The 3 Conditions of Zakat: Who is Required to Pay

• Muslims must pay if they have Nisab, that is the minimum amount of savings or assets for at least one year, which is usually the value of three ounces of gold. Business assets, cars, farm animals, cash, and jewelry are also included (are “zakatable”)
• People who are past the age of puberty and are of sane mind must pay zakat. Children or the mentally challenged are exempt.
• All yearly expenses must be paid, including any debts.

If all three conditions are met, then zakat in the amount of 2.5 percent of your average annual wealth should be paid to either a government agency or a local mosque or charitable organization.

The money is then distributed to those who need it. This system helps to redistribute the wealth and is constant, meaning the wealthy will pay a larger share into the fund than the poor will.

How is Zakat calculated?

To calculate Zakat, Muslims need to determine their total annual income and deduct any outstanding debts or expenses from it. If their remaining wealth meets or exceeds the Nisab threshold, they are eligible to pay Zakat. The Zakat amount is 2.5% of their total remaining wealth.

For example, if someone has savings of $20,000 and owes $2,000 in debts, their total remaining wealth is $18,000. If this amount is equal to or exceeds the nisab threshold, they would owe 2.5% of $18,000, or $450, in Zakat.

It’s important to note that certain assets, such as personal items like clothing and furniture, are not included in the Zakat calculation. Additionally, there may be specific rules or guidelines for calculating Zakat in different Islamic traditions or regions.

This video by IFG explains ll you need to know about Zakat calculation:

The 5 Categories of “Zakatable” Possesions

Zakat is required to be paid on five types of wealth. These include:

• Personal wealth, such as money in hand or bank accounts, stocks, and retirement funds.
• Business wealth, including trading goods and exploited assets like rented properties and factories.
• Agricultural produce, such as crops from irrigated and non-irrigated land.
• Livestock, like sheep, goats, cows, and buffaloes are also subject to Zakat. 
• Treasure troves, like buried valuables and natural resources such as oil, precious metals, and gemstones must also be taken into account. 

Is Zakat Tax Deductible?

In some countries, zakat may be tax deductible if certain conditions are met. It is important to check with the relevant tax authority in each country to determine if zakat is eligible for tax deduction.

When is Zakat Paid?

Zakat is paid annually and there is no specific time of the year for it, as long as one has had possession of the minimum amount of wealth (nisab) for a full lunar year. 

Muslims can pay Zakat throughout the year, but many choose to pay it during Ramadan as it is considered a blessed month.

It is also common to pay Zakat during the last ten days of Ramadan, known as the “Night of Power” or “Laylat al-Qadr.” It is recommended to pay Zakat as soon as possible after the due date to avoid any delays or missed payments.

Who are the Recipients of Zakat?

Mandatory for all Muslims with Nisab, this charitable giving is distributed to eight different groups of people; the Zakat payment benefits those who are considered to be the most deserving of it. These eight groups of people are:

1. The poor (al-fuqarâ’): Those who do not have enough wealth to cover their basic needs and necessities.
2. The needy (al-masâkîn): Those who are poor to the point that they may not even have shelter or sufficient clothing to protect them from the elements.
3. Zakât-workers: Those who are responsible for collecting and distributing Zakat.
4. Those whose hearts are to be reconciled: This group includes people who have recently converted to Islam or those who may be on the fence about embracing the religion.
5. Those in bondage (slaves and captives): This group includes people who are in captivity or slavery and are in need of financial assistance.
6. The debt-ridden: Those who are in debt and are unable to pay it off on their own.
7. In the cause of God: This group includes those who are working to advance the cause of Islam, such as Islamic scholars and development workers, preachers, and those working for Islamic charities.
8. The wayfarer (the stranded, or one traveling who lacks resources): This group includes people who are traveling and do not have the means to support themselves.

By supporting these groups of people, Muslims fulfill their religious obligation of purifying their wealth and helping those in need.

Who Cannot Receive Zakat?

If someone does not fit into any of the eight categories that are entitled to receive Zakat, they cannot receive it. This includes six types of people, but there may be exceptions within these types. The six types of people who are prohibited from receiving Zakat are:

1. The wealthy: People who have enough wealth to cover their basic needs and necessities.
2. The capable to work: People who are physically and mentally able to work and earn a living, but choose not to.
3. Believers who refuse to work: People who spend their time in religious pilgrimage but refuse to work to support themselves.
4. Renouncers of Islam: People who do not believe in Islam or have renounced their faith.
5. Other non-Muslims: People who are not Muslim and do not convert to Islam.
6. The family members of Zakat payers: Immediate family members of the person who pays Zakat, such as children, parents, and wives, are not eligible to receive Zakat.

It is important to note that there may be exceptions within these types, and it is up to the individual giving Zakat to determine who is eligible to receive it based on their personal circumstances and knowledge of their community.

The Six Virtues of the Zakat Payer for Muslims

According to the scripture, Zakat is associated with six important virtues that directly benefit the giver.

• First, paying Zakat is a sign of good character and sincerity as a Muslim, which is the virtue of faith.
• Second, it is a virtue of righteousness because it is an act of obedience to God’s command.
• Third, it is a virtue of true belief because it indicates a true belief in the afterlife and the importance of doing good deeds in this life.
• Fourth, Zakat is linked to the virtue of receiving divine mercy, as God promises to bless those who give for His sake.
• Fifth, giving Zakat can lead to attaining success in the hereafter, where the ultimate reward awaits.
• Finally, it is a virtue of freedom from fear on the Day of Judgment because giving Zakat is an act of seeking God’s forgiveness and mercy, which can help one to face the Day of Judgment with confidence and hope.

Quran Verses about Zakat

In the Quran, there are 82 verses that talk about both Zakat (charity) and Salat (prayer). These two things are very important in Islam and are mentioned together a lot. Salat is the second most important Pillar of Islam, which comes after Shahada, declaring that God is One.

 Some of the verses that mention zakat include: