What is Zakat?
Islam has provided a comprehensive and extensive concept of worship: it encompasses all good deeds in a person’s life. In Islam, all praiseworthy practices, such as good manners, piety, modesty, helping others, charitable giving, and forgiveness, in sum all religious and secular deeds, are considered as acts of worship, and are means of attaining paradise. These good deeds and acts of righteousness may pertain to an individual, or society at large; life at the communal or international level; or an individual’s character or financial dealings. Regardless of the facet of life it deals with, it all comes under the purview of worship.
If the pillars of Islam and the goals that Islam aims to achieve are carefully considered, it becomes apparent that none of the pillars of Islam impact a person at the individual level alone; all of the acts of worship aim at the collective prosperity of society. By practicing them, the followers of Islam are consistently being taught this lesson. Through the Zakat (alms-due), Islam has provided mankind a comprehensive system for the collective welfare of humanity and the prosperity of society.
Besides the fulfilment of the obligatory acts of worship, Islam also encourages supererogatory performances to cover the shortfalls in the performance of the obligatory actions. Similarly, along with the obligation of paying the Zakat, Islam also encourages Muslims to give in way of charity (sadaqa), as a supererogatory act of virtue. Through this, the believers are taught not just to decrease their desire for their hard earned wealth, but to consider the difficulties of others as their own, so that a practical model may be provided of a society where the affluent support the less well-off, as a means of alleviating their poverty.
Zakat and sadaqa are not only terms for financial sacrifice, but are endeavours which have been rightly declared as means for gaining the pleasure of Allah (SWT) and attaining proximity to the Holy Prophet (SAW). In his ground-breaking book, the ‘Islamic philosophy of human life’, Shaykh-ul-Islam Dr Muhammad Tahir-ul-Qadri writes:
The sole purpose and goal of human life is to attain the pleasure of Allah (SWT). For this a struggle begins for the purification of one’s soul (tazkiyya al-nafs), which is attained by adopting the practice of ihsan (spiritual excellence). However, the only practical means of attaining ihsan is to spend one’s wealth (in the way of Allah). Without this, nothing of ihsan remains and no other path becomes available in attaining this essential goal (of Allah’s pleasure).
We have carefully selected and displayed below the most commonly asked questions from the book by Dr Muhammad Tahir-ul-Qadri – Teachings of Islam: Zakat and Sadaqah
1. What is Zakat?
Zakat is one of the important pillars of Islam, which is sometimes referred to as al-sadaqa al-wajiba (obligatory alms). According to the Shariah, the person who possesses the required threshold which makes Zakat obligatory must give a specific amount of his wealth to those who are eligible to receive Zakat, according to their specific condition, so that their needs are fulfilled.
2. What are the conditions that make Zakat compulsory (fard)?
The following conditions must be fulfilled in order for Zakat to be compulsory (fard) upon an individual:
- One should be a Muslim: Zakat is not compulsory upon non-Muslims.
- One should be mature (i.e., above the age of puberty).
- One should be mentally sound: Zakat is not compulsory on those who are insane.
- One should be free (i.e., not a slave or in bondage).
- One should have complete ownership of the wealth: the wealth can only be subject to Zakat, if it is in complete ownership of the individual. For example, if someone buried some possessions somewhere and forgot where he had buried them, and then remembered years later, the Zakat will not have to be paid for the interim period when the possessions were missing.
- One’s wealth should exceed that which is required to fulfil the basic necessities of life.
- One should be free of debt. For example, if someone has £1000 saving, but he also has a debt of £1000, he is not liable to pay the Zakat, so long as his savings do not exceed his debt.
- Zakat is payable on that wealth or property which grows either materially, such as trade goods or free-grazing livestock, or in value, such as gold or silver.
- The total value of the wealth and property should be above the threshold determined by the Shariah.
- The person must have been above the Zakat threshold for a whole lunar year. One does not pay the Zakat as soon as one reaches the threshold; rather a whole lunar year has to pass before one pays the Zakat on the condition that one still above the threshold one year on.
3. What is nisab?
Those assets, wealth, and property upon which it is compulsory to pay Zakat must pass a threshold in order for the Zakat to become obligatory on a person. This threshold is known as ‘nisab’.
4. What is the nisab of gold?
Zakat becomes obligatory if someone is in possession of 87.48 grams of gold. `Ali b. Abi Talib narrates that the Holy Prophet [SAW] said,
It is not compulsory upon you, i.e., on gold, until you are in possession of 20 dinars. When you have 20 dinars and a whole year passes, then half a dinar becomes obligatory on it, and whatever exceeds it, then it is in accordance to the excess (i.e., 1/40) [Abu Dawud, #1573].
It is narrated that `Abd Allah b. `Umar and `A’isha both narrate that the Holy Prophet (saw) used to take Zakat of half a dinar from 20 dinars, and one dinar from every 40 dinars (i.e., 1/40) [Ibn Majah, #1791].
It should be noted that in those days, dinars were gold coins and 20 dinars weighed 87.48 grams.
5. What is the nisab of silver?
Zakat becomes obligatory if someone is minimally in possession of 612.36 grams of silver. One-fortieth (1/40) of the total amount should be paid as Zakat. Abu Sa`id al-Khudri states that the Holy Prophet [SAW] said,
There is no Zakat upon any silver that is less than five awqiya (612.36 grams) [Bukhari, #1390].
It must be noted that the Zakat due is equivalent to 2.5% either by weight or value.
6. Is Zakat payable on valuable stones and jewels?
If these valuable stones and jewels [i.e., other than gold and silver] are for the purpose of trading, then they are liable for Zakat. If however, they are used for one’s personal use, Zakat does not need to be paid on it, irrespective of its value.
7. Does one have to make a formal intention (niyya) when paying Zakat?
Yes, in order to fulfil one’s obligation, one must intend (i.e., specify) that they are paying the Zakat. As an act of worship pertaining to financial dealings, an intention is required in order for it to be performed correctly. The intention (niyya) for fulfilling one’s obligation is to intend that one is paying the Zakat, whether that be at the time of distributing one’s wealth to those who are eligible (i.e., at the time of payment), or when setting the Zakat money aside.
8. During the year, can the Zakat be paid in advance through small instalments?
Yes, someone who is legally responsible to pay the Zakat can pay through monthly instalments throughout the year, with the intention of paying the Zakat. When the lunar year comes to an end, the Zakat should be calculated, and whatever remains outstanding should be paid off. In similar fashion, the outstanding amount can also be paid through instalment.
9. Can the obligation of two years be paid at the same time?
Yes, it is best to pay the Zakat on time; however, if the Zakat of the previous year is outstanding, then it can be paid together with the Zakat of the current year.
10. Can Zakat be paid in advance (before its due-date)?
Zakat can be paid before its due-date and this is a correct method of paying it. `Ali b. Abi Talib narrates that `Abbas asked the Holy Prophet [SAW], ‘Can the Zakat be paid before its time?’ The Holy Prophet [SAW] permitted him to do this [Abu Dawud #1624].
11. On the passing of a whole year, if one’s assets or wealth become lost or misappropriated and one has not yet paid the Zakat, what would be the ruling in this case?
The obligation of paying the Zakat of that year will be dropped. That is, one will be forgiven for the amount which is lost or misappropriated.
12. On what kind of wealth or asset should the Zakat be paid?
It is obligatory to pay the Zakat upon four types of assets:
- Gold, silver, and cash.
- Livestock, such as camels, cows, and goats, etc.
- All kinds of trade goods and merchandise (including property bought with the intention of re-sale).
- Those products that are produced from the land such as fruit, vegetables, and minerals, etc.
13. Should the Zakat and sadaqa be paid only in Ramadan?
It is not a condition of Zakat and sadaqa that it is paid only in the month of Ramadan; however it is the most recommended time to pay it. It is obligatory (wajib) to pay the Zakat as soon as the lunar year has passed, and its payment should not be deferred till the month of Ramadan. However, if Ramadan is drawing near, such as the Zakat is due in Sha`ban, then there is no harm in waiting till Ramadan to pay it. If however the year comes to an end in Muharram, one should not wait till Ramadan to pay it; rather it should be paid at the first instance. If someone wants to pay the Zakat in Ramadan, then the way of doing this would be to pay the Zakat in advance before the year is complete (i.e., the Ramadan prior to Muharram). It is not permitted to delay the payment of one’s Zakat after its due-date.
14. Is Zakat compulsory (fard) upon a woman’s dowry (mahr)?
Being in complete ownership of one’s possessions is a precondition of Zakat. Before a woman decides whether the payment of Zakat is obligatory on her dowry, she should first ensure whether or not she is in full ownership of it. If the dowry is not in her full ownership then she is not obligated to pay Zakat on it.
15. Whose responsibility is it to pay the Zakat on the wife’s jewellery?
Between the husband and wife, whoever is in real ownership of the jewellery will be liable to pay the Zakat. If the husband has given the jewellery to his wife simply for safekeeping, in that he can sell or dispose of them the way he wants, then in that case the Zakat will not be due upon the wife, as it will be the husband’s responsibility. However, if the wife owns the jewellery and the discretion is hers to either wear or sell them, then she will be responsible to pay the Zakat.
16. Can a husband and wife give their Zakat to each other?
No, a husband and wife cannot give their Zakat to each other.
17. Is the Zakat obligatory upon a person in debt?
A person who is in debt should put aside the money he or she owes (to pay back the debtor). Whatever money or asset is leftover, if it reaches the nisab, the Zakat becomes obligatory; but if it does not reach the nisab, then the Zakat does not need to be paid.
18. Can a person’s debt be cleared by Zakat money?
Yes, if the one in debt is poor and is not obligated to pay the Zakat, then no doubt the Zakat money can be used to clear his debt. However, if the person in debt is wealthy and qualifies to pay Zakat, then it is not permitted for him to take Zakat money to pay off his debt. In the former case, where the person is eligible to receive Zakat, the debtor does not need to mention that he is using Zakat money to cancel his debt; he simply needs to let him know that he is no longer liable to pay back the loan, so that his dignity and honour are not tainted.
19. If someone does not have any gold or silver, but has plenty of cash and other assets leftover after fulfilling his basic needs, is the Zakat obligatory? If it is, then what is the method of paying it?
After fulfilling one’s basic needs, if there is cash and other assets leftover, the Zakat will still be obligated on the person, even if the person does not own gold or silver. The reason for this is that gold and silver were used as currency in the time of the Holy Prophet [SAW]. In the contemporary era, paper currency has replaced gold and silver, so paying Zakat upon all currency alongside silver and gold is more beneficial to the poor and so must be paid.
The method of calculating the Zakat is that any surplus cash that remains after fulfilling one’s basic needs that reaches the level of nisab (i.e., 612.36 grams of silver), a year has passed, and there is no debt to pay off, then Zakat must be paid by giving 2.5% of that wealth to those who are eligible to receive it.
20. Which is used to determine the nisab: gold or silver?
According to Imam Abu Hanifa, the one that is more beneficial to the poor should be used as the nisab [Kasani 2:21]. Imam Marghinani, in al-Hidaya [1:105], states regarding this statement of Imam Abu Hanifa:
As a measure of caution one from either of gold or silver should be used that will better provide for the needs of the poor and destitute.
It is also the dominant opinion that silver can be added to gold, or vice versa, in order to reach the nisab amount. Trade goods and merchandise can also be added for this purpose. This is the view of the majority and it is supported by the following hadith related by Bukayr b. `Abd Allah Ashaj:
It was the practice of the Companions of the Holy Prophet [SAW] that gold was merged with silver, and silver with gold, in order to pay the Zakat [Kasani 2:19].
21. What is the ruling on cash which is above the nisab amount?
Zakat is compulsory (fard) on any currency that reaches the amount determined as the nisab. The jurists have given the following conditions for the obligation of Zakat on paper currency:
- The currency should have reached the amount of nisab.
- A whole lunar year must have passed.
- There is no debt to pay off.
- The cash that one has in his possession is excess of his basic needs such as his day-to-day expenditures, e.g. clothing, food and accommodation.
22. Is Zakat to be paid upon houses, flats, or lands which are used as one’s personal accommodation?
Zakat is not due on houses, flats, or lands which are used as one’s personal accommodation. However, if one rents a house, flat, or shop for the purpose of making profit, then the Zakat is due on the annual net earnings. If the annual profit from all the means of income reaches the nisab amount, then Zakat must be paid on it.
Zakat must also be paid on the value of one’s house, flat, or land which was bought originally with the purpose of re-sale (i.e., for business or trade purposes). The Zakat should be paid on the current market value, and not the purchase price. This is a point to be considered by those investing in land or property.
The tenant must pay the Zakat on the deposits which he or she pays as guarantee for renting a property. Likewise, the Zakat of security deposits that are paid by traders and agencies to firms or organisations that is returnable must be paid by the depositor.
23. Is the Zakat compulsory on trade goods and equipment?
Zakat is compulsory on trade goods and merchandises (i.e., items which are bought with the intention of re-sale), but not on tools or equipment used in trade or business. Equipment and tools which are used for one’s business and trade are a means of one’s income, and the means of income have been declared as exempt from Zakat by the Shariah. However, the profit gained by their use, if it reaches the nisab and a year has passed, it becomes compulsory to pay the Zakat on this.
24. Which value should be used in order to calculate Zakat upon shares?
Whether the shares are bought on a profit/loss basis or for capital gain, in both cases the Zakat will be calculated using the current market value of the shares. The purchase value of the shares will not be taken into consideration, regardless whether at the time of calculating the Zakat the value of the shares increased or decreased in value from its purchase price.
25. How will the Zakat be paid in a business partnership?
In a business partnership, each partner will pay the Zakat in accordance to his share of the business. For example, if two people are equal partners in a business, then at the end of the year they will pay the Zakat on half of the value of the business. It is narrated by Anas that Abu Bakr al-Siddiq writes with regards to this ruling,
Any assets that are shared, they should be worked out proportionally [Bukhari #1383].