Zakat is one of the five pillars of Islam and therefore one of the most essential activities that a Muslim performs as part of their Ibadah or worship. Zakat entails taking out a specific portion of wealth and transferring the ownership of that portion of wealth or assets to Zakat-eligible person[s] with the niyyah (intention) to pay Zakat. Most Muslims around the world give Zakat during the month of Ramadan leading to the biggest giving activity in the globe. This article explains what Zakat is and the responsibilities of the stakeholders. It will also help you in calculating Zakat and paying it to the ‘right’ people in the ‘right’ manner.

What is Zakat?

The most important point to understand is that Zakat is neither charity nor tax. Its literal meaning is to ‘purify one’s wealth.’ Zakat helps to earn the pleasure of Allah like other forms of Ibadah. Most scholars are of the view that Zakat is a form of Huqooq ullah (duty Muslims owe to Allah) rather than Huqooq ul Ibaad (duty Muslims owe to others). However,  one must still appreciate the impact that Zakat has in combating poverty. It is one of the biggest driving forces of community service worldwide. Globally there are around 2 billion Muslims leading to the largest distribution of almsgiving in the world.

Zakat should not be confused with Fitrana. Fitrana or Zakat-ul-Fitr is required to be paid between sunset on the last day of fasting till before the start of Eid prayers.

More on Zakat-ul-Fitr can be read by clicking here.

Who should pay Zakat?

All adult Muslims who are sane and free and who are Sahib al-nisab have an obligation to pay Zakat. Sahib al-nisab is an individual whose wealth exceeds or matches the Nisab value which is equivalent to the current market value of 612.36 grams of silver or 87.48 grams of gold. 

If all the conditions are met and the Sahib al-nisab completes one year of eligibility, they are required to pay 2.5% of their wealth as Zakat. 

Calculating Zakat

Before calculating the Zakat you owe, it's important to understand what it is based on. You primarily pay Zakat on the following assets:

1. Gold
2. Silver
3. Cash (including other liquid assets)
4. Goods of trade

It’s pertinent to note that as per Islamic law, assets are divided between real assets and monetary assets. Real assets have an intrinsic ability to satisfy a need. Monetary assets have no utility on their own but can be used to make purchases or simply hold value. Both gold and silver, in any form, are treated as monetary assets. The same goes for digital currency. Zakat is paid on all monetary assets.

Goods of trade (GoT) include items purchased with the intention to sell. Such items need to be included when calculating your wealth. Real assets purchased with the intention to sell become GoT. This may, thus, apply to a plot of land if it was purchased with the intention to make a profit upon resale. One must also understand that Zakat is not applicable to cars especially if the intention is to use them. However, if one purchases a car exclusively for selling it, it will become GoT. By the same token, buildings, machinery, trucks, vans, office furniture, computers, printers, and other items purchased for daily use are not ‘Zakatable.’

When calculating Zakat it’s also important to subtract receivables from payables to calculate the final figure indicating your wealth. If the wealth exceeds the Nisab, 2.5% of your total wealth should be paid out as Zakat. 

You can conveniently calculate the Zakat by using Feeling Blessed’s Zakat Calculator. Feeling Blessed is a mobile app that allows you to donate to more than 320 charities around the world conveniently. Once you calculate your Zakat, the app will give you a target against the amount you owe. This will help you not only manage your Zakat but pay it out using the same app. 

When to pay Zakat?

Zakat should be paid by Sahib al-Nisab after completing one year of eligibility. You should note the date when it first exceeds the Nisab and note it again after a year. If the net wealth is still above Nisab, you should pay Zakat immediately. When monitoring your net wealth do not consider fluctuations during the year as your wealth might go below the Nisab several times during that period. It’s also important to understand that you can pay Zakat any time of the year. However, most people give Zakat during the month of Ramadan, especially in the last Ashra. 

Whom to pay Zakat?

There are eight Masarif (recipients) of Zakat:

1. Al Fuqara' (the poor)
2. Al Masakeen (the needy)
3. A’amileen e zakat (those who are appointed to collect Zakat)
4. Al-Mu’allafah Qulubuhum (those whose hearts are to be reconciled; new Muslims and the friends of the Muslim community)
5. Fir-Riqab (slaves who want to free themselves)
6. Al-Gharimin (those who are overburdened by debt)
7. Fi sabilillah (in the cause of Allah)
8. Ibnus-Sabil (travelers stranded due to limited resources)

“Indeed sadaqah is for Fakirs, Masakeen and for Amileen (those deployed to collect zakat), those in whose hearts the inculcation of love for Islam is aimed at, and to free the captives and remove the burden of debtors and (those who toil hard) in the way of Allah and for the wayfarers. This has been prescribed by Allah. Allah, the All-Knower, the Most Wise.” 

[Al-Quran 9:60]

You should prioritize giving Zakat to the poor and the needy as they are most deserving.

Zakat cannot be given to Sadat or the descendants of the Prophet Muhammad (PBUH), to one’s close relatives, to non-Muslims, and to Sahib al-Nisab.

It’s also important to note that not all organizations are eligible to collect Zakat. Nonprofits working for animal welfare cannot collect Zakat as their beneficiaries do not include any of the eight groups described earlier. You can conveniently find out about Zakat-eligible organizations by going to the Feeling Blessed app which displays this information against each charity. 

Conclusion

All Muslims should be familiar with how Zakat is calculated and paid to ensure what you are doing is according to the teachings of Islam. The primary purpose of Zakat is to worship Allah and just like Namaz involves steps in a prescribed manner, Zakat too should be paid according to the commandments laid out in the Quran.

Head over to Feeling Blessed’s Zakat Calculator to find out the Zakat you owe and start paying it conveniently to more than 320 charities.