Zakat (Almsgiving)

What is Zakat in Islam?

Zakat (zakaat, zakah), or almsgiving, is one of the five pillars of Islam. This means that Zakat is mandatory for Muslims, along with the other four sacred pillars of Islam. For every sane, adult Muslim who owns wealth over a certain amount – known as the Nisab – he or she must pay 2.5% of that wealth as Zakat. Eligible Muslims pay Zakat once a year, and it is due as soon as one lunar (Islamic) year has passed since meeting or exceeding the Nisab (certain amount of wealth). The Zakat of every Muslim is then distributed to those who meet the criteria to receive it.

How Zakat is Calculated with an Example?

• Work out the value of all the assets you have owned over the past year. This includes gold and silver, savings, investments, shares, and business assets, as well as money owed to you. For example, if you own 200,000 PKR worth of gold and silver, and have 1,000,000 PKR savings in the bank, the value of your assets is 1,200,000 PKR.
• Work out your deductible liabilities, which includes the money you owe and other outgoings due. For example, if you owe 100,000 PKR to a relative and have a fine to pay of 50,000 PKR, the sum of your deductible liabilities is 150,000 PKR.
• Calculate the value of your net assets by taking away the sum of your deductible liabilities from the value of all the assets you have owned over the past year. Using the above example, this would be 1,200,000 PKR minus 150,000 PKR, which equals 1,050,000 PKR.
• Check if the value of your net assets is greater than this year’s nisab value. In this example, the value of net assets is greater than the nisab value this year.
• Calculate how much Zakat you have to pay (Your Zakatable Wealth x 2.5% = Total Zakat You Owe for the Year). For our example, this would be calculated as follows: 1,050,000 PKR x 2.5/100 = 26,250 PKR.

Islamic Relief’s Zakat Calculator makes the whole process simple and easy. All you have to do is plug in the assets you own and your deductible liabilities, and we’ll take care of the rest.

Is Zakat on Income or Savings?

Zakat is based on the amount of Zakatable assets that you own and not just savings or income. For every sane, adult Muslim who owns Zakatable wealth over a certain amount – known as the nisab – he or she must pay 2.5% of that wealth as Zakat.

Zakatable assets include gold, silver, cash, savings, and business assets, which have been in your possession over a lunar year. You can use our Zakat calculator to find out if you’re eligible to pay Zakat and how much you should pay based on your circumstances.

How to Calculate Zakat on Cash?

Calculating Zakat on cash is very straightforward:

1. Total how much cash you own from the past year, including all cash in your bank account, cash at home, and cash which is owed to you.
2. Take away any cash you owe to others (debts) as well as any cash outgoings due to work out how much cash you own.
3. If this value is above the nisab threshold, you must pay Zakat. This is calculated by multiplying the net cash you own by 2.5%.

Please note that you must calculate the Zakat due on cash alongside your other assets (this includes gold and silver, investments, shares, and business assets).

You can efficiently calculate how much Zakat you owe using our Zakat calculator.

How to Calculate Debts and Liabilities with Regards to Paying Zakat?

Some debts and liabilities can be deducted from the total value of your Zakatable assets when calculating how much Zakat you must pay from the last year. These include:

• Debts which must be paid off within 12 months.
• Up to 12 months worth of instalments of longer-term debts.
• Arrears and/or overdue payments.

However, not all debts and liabilities can be deducted from the total value of your Zakatable assets from the past year. These include:

• Expenses and bills which are not yet due.
• Debts that are not payable at all in the next 12 months.
• Interest payments. As interest or riba is haram, if a person has interest due on debt, this can’t be taken off the Zakat amount.

For mortgages and student loans, alongside other long-term debts, only the amounts which are overdue or due imminently should be deducted when calculating Zakat.

Zakat must also be paid on debts owed to you that you believe will be paid, such as the repayment of loans given to family and friends.