Answers to common questions related to zakat.
(Please note that for any specific queries, it is advisable to contact your local imam)
- What is the nisab?
To be liable for zakat, one’s wealth must be more than a threshold figure, termed the ‘nisab’. To determine the nisab there are two measures, either gold or silver.
Gold: The nisab by the gold standard is 3 ounces of gold (87.48 grammes) or its cash equivalent. This is approximately $3,560 on 16 April 2019, but will vary with the market value of gold.
Silver: The nisab by the silver standard is 21 ounces of silver (612.36 grammes) or its equivalent in cash. This is approximately $324 on 16 April 2019.
- Should I use the gold or silver nisab?
The nisab calculated with the silver standard is significantly lower than its gold counterpart. This is because the value of silver has plummeted since the time of the Prophet (peace be upon him).
There are arguments for using either nisab value – many scholars say that it is better to use the silver nisab since it will increase the amount of charity distributed, others say that the gold nisab is closer to the nisab in use at the time of the blessed Prophet (peace be upon him).
However, if your assets consist entirely of gold, you must use the gold nisab, and similarly, if they consist entirely of silver then the silver nisab must be used.
- What part of my wealth is ‘zakatable’?
Gold and silver: Any gold or silver you possess is zakatable, including jewellery according to the Hanafi school, because these two metals have intrinsic monetary value.
Other precious metals and stones are not zakatable unless they were acquired for the purpose of trade.
Cash or its equivalent: Cash at home, in bank accounts, savings, money lent to others, saving certificates, bonds, shares, investment certificates and so on, are all taken into account when calculating zakat.
Stock purchased for trade: Any goods you have bought with the intention of selling are included in your zakatable wealth.
- What part of my wealth is not ‘zakatable’?
Except for gold and silver, no zakat is payable on your personal belongings such as a house, car or any goods which were not purchased to trade.
- I have more money than the nisab but I need it for my living expenses.
If a person possesses wealth exceeding the nisab threshold, but has to pay rent, purchase food, clothing, etc., for themselves and their dependants, then these costs may be deducted from one’s wealth.
If, after deducting these costs, the remaining amount is less than the nisab then no zakat is payable.
- When does the zakat year begin?
The zakat year begins on the date you were first in possession of wealth above the nisab.
This will be your seed date, whenever it comes around you will have to calculate zakat, irrespective of any fluctuations in the amount of wealth in your possession.
The only situation in which your seed date will change is if you were to become totally bankrupt and lose all your assets and belongings. In this situation, your new seed date will begin when you are once again in possession of wealth above the nisab.
If you are not sure of your seed date, then estimate it to the best of your ability.
- My wealth decreased below the nisab for a few months during the year. Do I still pay zakat?
As long as you are in possession of wealth above the nisab threshold at the beginning and end of the zakat year, then zakat will be due, even if your wealth dipped below the nisab for some or most of the year.
- I earned a large amount of cash a few days before the zakat year was up. How do I calculate my zakat?
You pay zakat when the zakat year has elapsed, irrespective of when particular portions of your wealth came into your possession. Even if the cash came into your possession a day before the zakat year had elapsed, you would have to pay zakat on it the following day.
- I saved some money for hajj. Do I pay zakat on it?
Yes, zakat is payable on money saved for hajj, provided it is kept for one lunar year, and your total wealth meets the nisab threshold.
- Do I pay zakat on my pension fund?
There are two ways in which a pension can be funded:
1) Payments are deducted from a salary before it comes into the possession of the contributor.
2) The contributor makes payments from money that has already come into their possession.
If the payments are deducted from the salary at source, so that the money never comes into the possession of the contributor, no zakat is due on the payments, nor is it due on the amount that accumulates in the pension or provident fund.
Zakat will only become payable when money from the fund is paid out and received by the contributor.
If the pension payments are made after the money has come into the possession of the contributor, then zakat is payable on the money that accumulates in the fund.
- I have some shares. How do I calculate what zakat I owe?
Shares are of two types: those purchased by a speculator who trades in shares, and those bought for investment.
If you are a speculator and have bought shares specifically for the purpose of selling them and making a profit, then the entire market value of the shares is subject to zakat since it is considered as stock in trade.
If, however, you have bought shares as an investment and to receive dividends, then calculate the percentage of zakatable assets the company has, then pay zakat on that percentage of the value of your shares. To do this you would need to look at the yearly accounts of the company, and work out what percentage of its assets are stock, raw materials, cash, gold or other zakatable items. Buildings, machinery, vehicles and so on that are essential for the business are not zakatable.
- I have debts. Do I pay zakat?
The basic principle is that debts are deducted from wealth, and if the remainder is still over the nisab threshold, zakat is payable, otherwise not.
However, if a person has a large debt that is being paid off in instalments, such as a mortgage or a large credit card debt, then one should only deduct the payment that is currently due from one’s assets.
- Someone owes me money for work I did for him, do I pay zakat on it?
Zakat is not payable on money you are owed for work, until you receive the payment.
Similarly, zakat is not payable on a dowry that you have not yet received, or an inheritance share that you are due but has not come into your possession.
- I lent money to someone, do I pay zakat on it?
Yes. You can either pay zakat for every year that passes until you receive the loan back, or you can wait until you receive the loan and then pay the accumulated zakat in one go.
If the loan is insecure and you are unsure if the borrower will be able to pay you back, it is better to delay the zakat payment until you receive it, at which point the zakat accumulated over the years will be payable. If you never receive the money back, no zakat is payable.
- I have my own business, how do I pay zakat on it?
If you have a business, all stock in trade is liable for zakat, including land and real estate that has been bought for the purpose of resale.
Raw materials and goods produced for sale are also subject to zakat. The buildings, machinery, vehicles and so on that are essential for the business are exempt from zakat.
- How do I calculate the value of stock in my shop?
The value of the stock in your shop is its market value, not the buying price. You can calculate this by estimating how much you would expect to receive if you sold the entire stock at once to a single buyer.
- I have ‘dead stock’ in my shop that I have not been able to sell for many years, do I still pay zakat on it?
Yes, you would need to pay zakat on it. Although when calculating its value, you would consider the price that you would be able to sell it for.
- I have taken out large commercial loans to expand my business, how will this affect my zakat calculation?
A loan you have taken out to acquire zakatable assets, such as raw materials, goods and so on, can be deducted from your capital. You pay zakat on what remains.
A loan you have taken out to acquire non-zakatable assets, such as furniture, machinery and buildings is not deductible.
General zakat questions
- Do I have to pay zakat?
Zakat is obligatory on someone who is:
1. A free man or woman.
2. Muslim: Zakat is a religious obligation upon Muslims, like the five daily prayers.
3. Sane: The person on whom zakat becomes obligatory must be of sound mind according to Imam Abu Hanifa. Imam Malik holds that an insane person is still liable for zakat.
4. An adult: Children do not have to pay zakat, even if they own enough wealth to make zakat obligatory. However, both Imam Shafi’i and Imam Malik say that the guardians of the children should pay the zakat on their behalf.
5. In complete ownership and control of their wealth: The person must own and be in possession of the wealth, and also be free to spend or dispose of the wealth in any manner they like. If a person has made a loan of their wealth then they are not in a position to spend it until it is repaid.
6. In possession of wealth above the nisab threshold: The person should possess wealth above a defined amount required to satisfy the essential needs of themselves and their dependents (nisab).
7. Free from debt: Someone in debt may deduct their debts from their assets. If what remains is still above the nisab threshold, zakat is due, otherwise not.
8. In possession of the wealth for one complete lunar (Hijrah) year: If one owns zakatable wealth for a lunar year, zakat will become obligatory on the amount remaining at the end of the year, provided the total amount of wealth exceeds the nisab at the beginning of the year and the end, irrespective of any fluctuations in the months between.
- Can I pay zakat in advance?
Yes, zakat can be paid in advance before the year has ended, but you should make sure you have wealth equal to or above the nisab.
- Who can receive my zakat?
To be eligible to receive zakat, the recipient must be a poor Muslim. A poor person is someone whose property in excess of his basic requirements does not reach the value of the nisab threshold.
The recipient must not belong to your immediate family: your spouse, children, parents and grandparents cannot receive your zakat. Other relatives however, can receive your zakat.
The recipient must not be a Hashimi, a descendant of the Prophet (peace be upon him).
- Zakat al-Fitr (fitrana)
Before the Eid al-Fitr prayer at the end of Ramadan, every adult Muslim who possesses food in excess of their needs must pay zakat al-fitr for themselves. The head of household can also pay on behalf of their dependants such as children, servants and elderly relatives.
The head of the household is responsible for paying zakat al-fitr for all dependants Zakat al-fitr can be paid during Ramadan, before Eid al-Fitr prayers at the latest, so that the poor can enjoy the day of Eid.
The minimum amount due is the equivalent of about 2 kg of wheat flour, rice or other staple foodstuff, for each member of the household, including children and dependants – even if they do not live in the same house. A safe estimate is approximately £5/US$7 per head.
Recipients of zakat al-Fitr are the poor and those in need, who are entitled to receive general zakat. Islamic Relief acts as your charitable agent, using your zakat al-fitr to buy and distribute food on your behalf.
- I gave a lot of money to charity over the year. Doesn’t that count as zakat?
For a donation to qualify as zakat, there must be a clear intention present, either when you separate the zakat money from the rest of your wealth, or when you make the zakat payment.
- Do I pay zakat on wealth belonging to my children?
Not according to the Hanafi school. A child is not liable to pay zakat, even if they possess wealth above the nisab threshold. The first zakat payment will become due twelve lunar months after the child reaches the age of puberty, if they possess wealth above the nisab.
According to Imam Shafi’ and Imam Malik, however, a child who possesses wealth above the nisab value is liable for zakat, the same as an adult.