According to the Hanafi madhab, Zakat has to be paid by Muslim adults, who are mentally sane and in possession of wealth, above the Nisab.The Shafi, Maliki and Hanbali madhabs are of the view that Zakat is also payable by children and the insane, as long as their wealth is above the Nisab.
You first become eligible to pay Zakat, the day your wealth [Net Assets] hits the Nisab threshold. The Zakat is calculated and paid on the wealth of a person, after a full lunar year/Islamic year. A lunar year is about 354 days long.
Example: Abdullah has recently started working and is paid £1,000 after 1 month. He has no debt and therefore his wealth is the full £1,000. The Nisab at the time is £190. Therefore, Abdullah becomes eligible to pay Zakat, as his new wealth is above the Nisab.
After 354 days, when it’s time to reassess his situation again and potentially pay the Zakat, Abdullah has saved £10,000 and has immediate/short-tem debts of £2,000. Hence, at the end of the lunar year, Abdullah’s wealth or Net Assets is £8,000. The Nisab at that point in time is £200. Therefore, Abdullah will need to pay 2.5% of the £8,000, which is £200.
Many Muslims pay the Zakat during Ramadan, as it is easy for them to remember when the Zakat is due. Often, they pay on the 27th night of Ramadan to maximise their rewards. However, the correct Islamic process is to calculate the Zakat, 1 Islamic year from the day you meet the Nisab threshold and pay it then.
What is the Nisab & Hawl?
The Nisab is the minimum amount of wealth a Muslim must possess, before they become eligible to pay Zakat.
Two values are used to calculate the Nisab threshold – Gold and Silver. The Nisab is the value of 87.48 grams of Gold or 612.36 grams of Silver. You can find the current values on our website or with a jewellery store.
In the Hanafi madhab, the value of Silver is used to ascertain the Nisab threshold and eligibility to pay Zakat. The other madhabs use the value of Gold.
Islamic Relief advises its donors to use the Silver value, as 2.5% is a small amount to pay of our wealth, to purify the wealth, strengthen the Ummah and please Allah SWT.
You may hear of the term Hawl, which means lunar year. A Hawl [lunar year] is 354 days long. Some people may refer it to as an Islamic year.
The actual payment of Zakat is to be made 1 lunar year, after you become eligible to pay Zakat, if your wealth on that date is at or above the Nisab.
When do I pay Zakat?
The moment you posses wealth above the Nisab threshold, you become eligible to pay Zakat. However, no payment is due on that date.
The Zakat is to be paid after 1 lunar year [Hawl], if your wealth at that future date is still above the Nisab value.
It does not matter if your wealth decreases or increases during the year. The value of the wealth [Net Assets] at the end of the lunar year is used to pay the Zakat, if it exceeds the Nisab.
Example 1: The Nisab is £200 today and Abdullah has £1000 in savings and no debt. His wealth/Net Assets are £1000 and therefore he becomes eligible to pay Zakat.
After a Hawl [lunar year] passes, Abdullah only has become richer and has savings of £2000. The Nisab threshold has risen to £210 over the year. Abdullah’s wealth is still above the Nisab Threshold at the end of the year, therefore he must pay Zakat on the £2000. He must pay the Zakat on the value of his wealth at the end of the Hawl.
Example 2: The Nisab threshold is £200 today and Abdullah has £1000 in savings and no debt. His wealth/Net Assets are £1000 and therefore he becomes eligible to pay Zakat.
After a Hawl [lunar year] passes, Abdullah has become poorer and has savings of £500. The Nisab threshold has risen to £210 over the year. Abdullah’s wealth is still above the Nisab Threshold at the end of the year, therefore he must pay Zakat on the £500.
Example 3: The Nisab threshold is £200 today and Abdullah has £1000 in savings and no debt. His wealth/Net Assets are £1000 and therefore he becomes eligible to pay Zakat.
After a Hawl [lunar year] passes, Abdullah only has lost his job and has savings of £100. The Nisab threshold has risen to £210 over the year. Abdullah’s wealth is below the Nisab Threshold at the end of the year, therefore he does not need to pay Zakat that year.
What do I count in my Wealth/Net Assets for Zakat?
Your Wealth or Net Assets can be summed up as the liquid assets you possess minus your short term liabilities.
Liquid assets are those that can be transformed into cash very easily. Short term liabilities include your bills, rent, personal loans and credit card debts. Most scholars agree that any mortgage that you may hold, should not be included in that calculation.
Here’s what should be included in your Assets:
•Cash in the bank and at home
•Cash saved for any special purposes e.g. wedding, hajj, car purchase, etc.
•The value of Gold and Silver you own
•The value of Shares at their market price
•Money owed to you, which is highly likely to be repaid.
•If you own a business, the balance sheet value of the Stock you possess.
•If you own properties, any rental income that’s been saved.
You do not have to count the value of your home or land as part of your assets. Also, you don’t have to include person items, such as a car, clothing, home appliances, etc. as part of your assets.
If you own investment properties [Buy To Let], then any saved rental income will be a part of your assets. The equity value of your investment property portfolio is not included as part of your assets in the Zakat calculation.
If any investment property is due to be sold around your Zakat due date, then the anticipated profit is to be included as part of your assets.
Here’s what should be included in your Liabilities:
•Money you owe to others i.e. personal loans [from banks and friends], credit card debts, etc.
•Current month’s Rent/Mortgage payment or Arrears
•Bills that are due
•If you own a business, then business expenses e.g. rent, rates, salaries, utility bills, etc.
•Short term business loans and overdraft amounts are included in your liabilities.
The calculation for your Wealth/Net Assets is:
Assets – Short Term Liability = Your Wealth.
As long as your wealth, is above the Nisab of the day, you are eligible to pay Zakat.
Gold and Silver
According to the Hanafi madhab, all Gold and Silver you own, must be included as part of your Assets in the Zakat calculation.
However, in the Shafi madhab, any Gold and Silver that is for personal use, does not need to be included as part of your Assets.
If all of your wealth is in Gold, the value of the Gold you own must be at or above the Gold Nisab, to be eligible to pay Zakat.
If your wealth is a mixture of Gold and/or Silver and cash, it is ideal to use the Silver Nisab threshold.
Many scholars hold the view that it will be highly beneficial to include all Gold and Silver that you own as part of your Assets, regardless of whether they are for personal use or not.
Abu Huraira (RA) reported that the Prophet (SAW) as saying:
“Charity does not in any way decrease the wealth and the servant who forgives, Allah adds to his respect; and the one who shows humility, Allah elevates him in the estimation (of the people).” [Sahih Muslim – Book 032: Hadith 6264]
Shares & Property Trading
If you possess Shares for the purposes of trading. Then you must include the value of the shares in your Assets.
However, if the Shares you possess are not for trading, but rather held as an investment, to deliver dividends, then it is only the dividends that need to be counted in your Assets.
The same rule applies to property trading. If a property is purchased with an intention to resell it, then the value of it must be counted in your Assets.
However, if a property is bought as an investment [to be let out], with the only benefit being the rental income, it is the profit [in the bank] that is eligible to be counted under your Assets.
Mortgages & Loans
A long term mortgage is not to be counted as a Liability in your Zakat calculation.
Loans that are taken out for a Personal purpose, can be subtracted as a Liability in the Zakat calculation.
Business Goods & Property
Business stock has to be counted as an Asset for Zakat purposes. The value to be used is what would appear on your Balance Sheet. Usually, it is the cost of purchasing the stock.
Business premises doe not need to be counted as an Asset in the calculation. Any property the business owns [land, retail units, etc.] also don’t need to be counted as Assets.
Beneficiaries of Zakat
The Qur’an (Chapter 9, verse 60) specifies eight categories for the distribution of Zakãt:
• The poor
• The needy
• Those employed to administer Zakat
• Those whose hearts are to be reconciled
• Those in slavery
• Those in debt
• In the way of Allah
• The destitute traveller
Islamic Relief distributes your Zakat amongst the needy and the poor.
Zakat-ul-Fitr (Fitrana)
This is not to be confused with the annual Zakat payment. Before the end of the month of Ramadan, every adult Muslim who has food in excess of his needs, must pay what is known as Zakat-ul-Fitr. He must pay for himself and can pay on behalf of his dependants.
Zakat ul Fitr must be paid before the Eid prayer. It is to be paid in the form of what is considered as staple foods of the community.
As Islamic Relief acts as an agent, we can be given the money to pay for the food beforehand which we will than spend where needed at the correct time to buy the food stuffs and distribute among those people around the world that are in need.
The quantity the Prophet (SAWS) described 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. If we translate this into a monetary value based on the price of a staple food such as flour or rice, it is approximately £4. In the UK, the Zakat Ul Fitr is currently £4 per person.
Can Zakat be paid in instalments or in advance?
You can pay your Zakat in advance on the due date, as long as you are confident that your wealth will remain stable. It is also permissible to pay the Zakat due in instalments, although it is preferred to have it paid in one single transaction.
Miscellaneous Questions
Q. Does the non-Muslim have to pay Zakat?
A. No, Zakat is only prescribed for Muslims.
Q. If a child’s wealth has satisfied all the conditions of Zakat (i.e. it is above the Nisab and has been in their possession for one year), should Zakat be paid on it?
A. No, Zakat is not due on it. The majority of the scholars from the past favoured the opinion that it should be paid. This is the same for both the child and the insane person, that their guardian should take the Zakat from the person’s wealth and pay it on their behalf.
Q. I have mixed assets of gold, silver and cash. Gold value: £800, Silver value: £100 and Cash: £100. The total value is £1000; do I have to pay Zakat?
A. Yes, as the value of your total assets is more than the preferred Nisab of approx. £346 and you have met all the other requirements.
Q. Together, I and my wife have wealth valued at £500. Can I pay Zakat for both of us?
A. As Zakat is an individual obligation, you must compare the Nisab with your own wealth and her own wealth to see if each of you has to pay Zakat. If you do, you may pay Zakat for both yourself and your wife as long as she consents to that.
Q. If one has not yet possessed his/her wealth for one lunar year, can he still pay Zakat?
A. Yes he can pay Zakat, but one needs to consider present/future liabilities.
Q. My wealth dipped below the Nisab during the course of the year, do I still have to pay Zakat?
A. Yes, but refer to Scholar.
Q. I received a large amount of money just before my Zakat was due for this year. Do I include it in this year’s Zakat?
A. Yes you need to include this in your Zakat calculation.
Q. I paid Zakat on £4000 last Ramadan. This year I have a total of £10,000 of wealth liable to Zakat. What value do I take the 2.5% from as I paid for the £4,000 last year?
A. Zakat is to be paid on the total savings regardless of what Zakat was paid on in the past. Therefore, you would pay 2.5% of £10000, £250.
Q. I normally give a lot of money in charity throughout the year, do I still have to pay Zakat?
A. Zakat must be paid with the intention of paying Zakat. If one gives any other charity, it cannot be counted as Zakat as they did not have the needed intention, thus you would still have to pay Zakat.
Q. How much is Zakat?
A. Zakat is 2.5% of your total wealth. Therefore if you have £10,000 of wealth liable to Zakat, you would pay £250.
Q. I owe several years of Zakat, how do I pay?
A. For every year that you owe Zakat, take 2.5% from the total wealth you had at the end of that year and pay that in Zakat. If you are not sure how much wealth you had, you must estimate it to the best of your ability. E.g. It is now Ramadan 2011. You have not paid Zakat for the last 5 years. You need to work out how much wealth you owned every Ramadan for the last 5 years and pay 2.5% of that.
Q. Who are the recipients of Zakat-ul-Fitr?
A. The majority of scholars hold the opinion that only the first two categories of the recipients of Zakat can receive Zakat-ul-Fitr.
Q. What do you mean when you say Islamic Relief acts as an agent and how does this allow me to pay in currency?
A. An agent is someone who facilitates your paying of Zakat-ul-Fitr because they are better placed to distribute it. You can pay them in currency because it is as if you are asking them to pay on your behalf. We use that money to buy the food which we give to the appropriate recipients. So it is as if you are the one giving food rather than currency.
Q. I have a shop where I sell clothes. How do I pay Zakat?
A. Every year at the time of paying Zakat, you would need to calculate the total selling price for all the goods for sale in your shop. E.g. All the clothes for sale in you shop add up to a total selling value of £2000. This figure would be added to your other wealth when calculating your Zakat.
Q. I bought a house for the purpose of renting 5 years ago. Last year I decided that I would sell the house. How do I pay Zakat on this?
A. For the 4 years that you were renting the house out and did not have the intention of selling, you do not pay Zakat on the house. But you would still have to pay Zakat on the rent you earned just like any other wealth you have. You must pay Zakat after one lunar year from the day you made the intention to sell the house. Zakat is to be paid on the selling price of the house. If you are paying in advance, you would need to estimate this. You would need to do the same for every year after that in which the house is still for sale.
Q. My Zakat is due in dhul-Qa’dah but I would like to pay in advance (in Ramadan). I have a debt which must be paid in Shawwal (after Ramadan). Can this be deducted from my wealth when calculating Zakat?
A. The general answer would be yes, but we would strongly urge you to consult a scholar about this.
Q. I lent some money out to a friend who informed me that he is able to return the money, do I have to include this in my wealth when calculating Zakat?
A. Yes, as it is as if he is just storing your money.
Q. 10 years ago I lent some money to a friend who is poor and I did not expect to get the money back. He has now paid me back, is this money liable for Zakat?
A. We need to look at the intention when the money was lent out. If the lender was fairly sure that he was not going to receive it back and he is unable to refer it to a judiciary, then in such cases Zakat is usually not payable. However, there are many variables and hence this question should be referred to a scholar.
Q. I have savings which I shall use to go for Hajj, is this to be included in my wealth when calculating Zakat?
A. Yes, it must be included.
Q. I have mixed jewellery consisting of gold, silver and precious stones. How do I calculate the value on which Zakat must be paid?
A. The best way for you to do this would be to take the jewellery to a jeweller and ask them to value just the gold and silver parts of the jewellery. The valuations they give will be the total on which you have to pay Zakat. Precious Stones are not liable for Zakat.
Q. What is the definition of the poor and needy?
A. The Fuqara & the Masakin
Fuqara are those that do not own wealth to the amount of Nisab.
Masakin are those who do not have food for the day ( 15 -20% of the world ).
Q. Can I give Zakat to my family members?
A. Zakat can only be given to people from one of those eight categories. If a family member is from one of those categories (e.g. he/she is poor and is unable to provide for himself), and he/she is not already dependant on you, than according to the majority of scholars, he/she can be given Zakat. But if he/she is one of your dependants, than you are obliged to spend on them anyway and cannot give them anything from your Zakat.
Q. Can you take Zakat-ul-Fitr before the 27th of Ramadan?
A. Yes you can, according to the Hanafi & Shafi’i Madh-hab.
Source: islamic-relief.org.uk
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