Basic Issues Concerning Zakat

“The alms are only for the poor and the needy, and those who collect them, and those whose hearts are to be reconciled, and to free the captives and the debtors, and for the cause of Allah, and (for) the wayfarers; a duty imposed by Allah. Allah is All-Knowing, All-Wise.”

(The Holy Qur’an 9:60).

Introduction

Zakat is the 3rd Pillar of Islam after Testimony of Faith and Prayers.

The word Zakat means both ‘purification’ and ‘growth’. Our possessions are purified by setting aside a proportion for those in need. .

Zakat is mentioned along with Salat (prayer) in 30 verses of the Holy Quran.

Every person should be knowing basic issues concerning Zakah as it may become applicable in our lives

Learning Objectives of this blog include:

  • What kind of things requires paying Zakat on them?
  • Is Zakat necessary on Gold?
  • Who are entitled to give Zakat?
  • What is Nisab?
  • How to calculate Zakat on gold?
  • Who Has to Pay the Zakah in the Family?
  • What kinds of things do NOT require paying Zakat on them?
  • Who are entitled to receive Zakat?
  • Who are NOT eligible for Zakat?
  • Consequence of giving Zakat on the Economy

 

What kinds of Things Require Paying Zakat on them?

Major Items

  • Gold and Silver
  • Cash (including loans, funds, trusts etc)
  • Business commodities (merchandise & stocks for sale etc)
  • Property (plots, cars, shops etc) intended for sale
  • Rent received from house, shops, car etc (not on whole house, but on rent)
  • Livestock Animals: Cows, Camels, Goats including sheep
  • Wheat, Barley, dates and raisins and other
  • Agricultural Produce (1 lunar year does not need to pass, give at harvest)

Note: Zakat will be calculated on total worth of lunar year savings in Gold, silver, cash etc

Is Zakat necessary on Gold?

According to Imam Abu Hanifah (RA), Zakat has to be given on Gold whether it is being worn or not. This is considered as the more correct opinion.

References:

  • Holy Quran:
  • “And those who hoard gold and silver and spend it not in the way of Allah – give them tidings of a painful punishment. The Day when it will be heated in the fire of Hell and seared therewith will be their foreheads, their flanks, and their backs, [it will be said], “This is what you hoarded for yourselves, so taste what you used to hoard.” (9: 34-35)
  • Ahadith:
  • Hazrat Asma bint Yazid reported:My aunt and I, while wearing gold bracelets went to the Prophet (PBUH). He asked: ‘Did you pay their Zakah?’ She related that they had not. The Prophet (PBUH) said: ‘Do you not fear that Allah will make you wear a bracelet of fire? Pay its Zakah.(Ahmed)
  • Hazrat Aisha RA narrated:The Messenger of Allah came to me and saw me wearing silver rings, whereupon, he asked: ‘What is this, Aisha?’ I replied: ‘I made them to adorn myself for you, O Messenger of Allah.’ He said: ‘Did you pay their Zakah?’ I said: ‘No, or what Allah wishes.’ Then he said: ‘Their punishment in Hell is enough for you.’(Abu Dawood)

Who are Entitled to Give Zakat

For Zakat to be fardh (due) on a person he has to own the nisab value.

Nisab : 

 ‘Minimum amount saved in a lunar year upon which Zakah becomes obligatory.’

  • Savings maybe in form of cash, gold etc
  • Year may be from Muharram to Muharram or Ramadhan to Ramadhan, depends in which month or better which day of the Islamic calendar a person takes yearly account of his savings and pays Zakah.
  • Is taken as 7.5 tola gold (87.48 grams) or 52. 5 tola (612.36 grams) silver (some scholars take as 7.5 tola gold or 85 grams gold and 595 grams silver)
  • Most scholars (all around the world including Pakistan) take Nisab equivalent to 52.5 tola silver (the lower value as opposed to higher value of 7.5 tola Gold)
  • The second opinion described below says the Nisaab should be taken as 7.5 tola or 85 gm gold or its equivalent and this opinion seems more strong as discussed below.
  • 1 tola silver now a days is 700 rupees. So 52. 5 tola silver is around 36, 750 rupees (depends on its rate day to day)
  • So whoever has saved around 36750 rupees in cash or gold etc for a year has to pay 2. 5% Zakah on it.
  • There is different Nisab on Animal stock (camels, goat, sheep and cows) and dates, barley, and other agricultural produce (Not discussed in this blog)

These figures are ONLY valid in Pakistan. For others please check rates of Gold & Silver and the Nisab fixed by local scholars of your country for the specific year. If not sure of Nisab fixed by scholars, find out rate of silver. 52.5 Tola or 595 grams silver equivalent in cash will be the Nisab.

Quiz Question:

How can Nisab be 36750 when this amount is not even worth 1 tola of gold (which is 50,000 rupees); it was stated above that Nisab is 7.5 tola of gold?

Answer:

Zakah on Gold in Current Paper Money System with Proofs: 

1. The answer is because of yet another evil of paper currency

The value of gold has increased tremendously relative to price of silver. Value of dinar (gold) in Islamic history has always been 7 Times the value of dirham (silver).

Hence the 7: 1 ratio (7.5 – 52. 5 or 87.48 gm: 612.36 gm ratio or 85 to 595 gm)

Islamic dinar is a coin of pure gold weighing 4.25 grams. The Islamic dirham coin is 2.975 grams of pure silver. Again ratio is 7: 1)

This ratio has been disturbed by fraudulent paper money

Read the following article before proceeding further:

https://drnaumanshad.wordpress.com/2015/05/29/why-paper-money-is-essentially-haram-forbidden/

The above issue does not absolve oneself of paying Zakah on gold savings

Thus if one has e.g. 5 tola of gold saved with him/her since 1 lunar year, 2. 5% Zakah is now due on him

First evaluate lowest price of 1 tola gold in last lunar year i.e. about 50000 rupees

So 5 tola gold worth = 250000

Zakah due = 250000 x 2. 5 % = 6250 rupees

This is besides the Zakah due on cash and other items

Further Logical Proofs:

2. If Nisab is taken as 7.5 tola gold, this would imply:

7.5 tola of gold would be about 375000 rupees today which would make most people ineligible to pay Zakah.

(However if they have 52.5 tola silver equivalent to 36, 750 rupees, they are eligible for Zakah; looks very illogical)

3. Also it sounds illogical that a person who has 370,000 rupees or even 37,000 rupees in cash has to give Zakah but if he has 350,000 rupees worth of Gold ( 7 tola of gold), he does not have to pay Zakah!

4. Let me give another example to make it clear:

Suppose one has 350, 000 rupees cash for 11 lunar months which is well above the Nisab (about 37000) for paying Zakah

But suppose he buys 7 tola gold of all that money in the 12th month just to avoid giving Zakah if he thinks Zakah is only upon 7.5 tola gold and he only has 7 tola

Would not that be illogical and wrong?

It is because of the fraudulent paper money that scholars cautiously take Nisab as value of 52.5 tola silver every year (the lower value) or its equivalent in cash AND NOT THE VALUE OF 7.5 TOLA GOLD or its equivalent in cash.

5. Gold as means of Investment

A person can avoid paying most of the zakah by transferring his money into assets that do not fall under “money” or “medium of exchange” like gold or diamonds or other precious stones (mentioned below).

As some scholars including Dr. Zakir Naik state that diamonds or other precious stones are liable for Zakah if intended for investment or has a market value. So same should apply to gold as well.

“Assets subject to zakah are those that either fall within the definition of money or are items having a market value”. This means that any item that can be acquired for “trade and resale” is subject to zakah even if it is not actually acquired for that purpose, for such an item necessarily has a market value.

http://www.islamicperspectives.com/zakah-diamonds.htm

6. Also proved by the fact that if someone has even 1 tola of gold, he/she CANNOT RECEIVE zakat! 

7. More Proof

If someone has gold less than 7.5 tola and some cash for a whole lunar year, whose combined worth is more than Nisab of 52.5 tola/595 gram silver, then Zakat also becomes compulsory on the net worth .

2nd Opinion: 7.5 Tola Gold Taken as Nisaab

Nisaab is taken as 7.5 tola gold (85 gm) or its equivalent in cash.

Reason: The gold: silver ratio (7: 1) described below, has been disturbed so as the price of silver has not risen as rapidly as the price of gold)

At the time of the Holy Prophet, the price of a good camel was around 85 gm of gold, (today 375,000 PK rupees), and the price of such a camel today is around about the same. The value of 52.5 tola of silver has not risen that much and is about 36-37 000 PK rupees.

And a poor person cannot afford to buy a camel worth 3-4 lakh rupees.

In this regard, this second opinion seems more strong i.e. anyone having saved in a lunar year, 7.5 tola gold (85 gm gold) or its equivalent in cash) or combination of gold, silver, cash etc equivalent to 85 gm gold will be liable to pay zakat.

Also with this opinion, any one having less than this amount in gold or its equivalent in cash or combination of gold, silver, cash or other savings, can receive Zakat.

Zakat on Buying or Selling Price of Gold and Silver?

Zakat is on selling price of gold or silver after one year of its saving, irrespective of its buying price.

Who Has to Pay the Zakah in the Family:

  • Each member of family is considered individually
  • Zakah is to be paid by each owner or on behalf of owner if above Nisab i.e father, mother, children if they all own and save above Nisab level
  • If wife/child owns but does have the money to pay Zakah and the husband/father is not willing to pay it, she will have to give from her own money or sell off some of the gold etc to pay the Zakah or pay off Zakah by some other means

What kinds of things do NOT require paying Zakah on them?

Major Things:

  • Savings in cash, gold etc (individually or in combination) that do not reach amount of Nisab
  • Some things that are of personal use e.g.
    • Home
    • Car, motorcycle etc
    • Furniture
    • Household items like Crockery, Fridge, Computer, TV etc
    • However, if one has excess of above items e.g. two homes, two cars etc, then Zakah will have to be paid if the extra home, car etc is used for commercial purposes, like putting on rent
    • No Zakah on Machinery e.g. in factories etc

 

Who are Entitled to Receive Zakah?

“The alms are only for the poor and the needy, and those who collect them, and those whose hearts are to be reconciled, and to free the captives and the debtors, and for the cause of Allah, and (for) the wayfarers; a duty imposed by Allah. Allah is knower, Wise.”

(The Holy Qur’an 9:60).

Zakah is distributed among 8 asnaf (categories) of people, mentioned in the Holy Quran in the verse above, namely:

  •  Fuqaraa: (The Poor): Those who own valuables (gold, silver, cash etc) in excess of basic necessities but below the value of Nisab (even if owns a house, car, household furniture, utensils, clothes or other similar things). The two opinions on amount of Nisab given above.
  • Masakeen: (The Needy) Persons of extreme poverty who possess no wealth whatsoever.
  • Aamileen: (Zakah collectors): Those persons who are appointed by an Islamic Head of State or Government to collect Zakah. It is not necessary that this be a needy person.
  • Muallafatul Quloob (Reverts to Islam): Those poor and needy persons who are given Zakah with the intentions of solidifying their hearts because they maybe recently converted to Islam or to bring them closer to Islam.
  • Ar-Riqaab: slaves whose masters have agreed to set them free on a payment of a fixed amount. Zakah may be used to purchase their freedom.
  • Ibnus-Sabeel: A traveler, who, whilst wealthy at his residence, is stranded and in need of financial assistance.
  • Al Ghaarimeen: A person whose debts exceed his assets and his net assets (after deducting his liabilities) is below the Nisab limit. To determine whether a person qualifies, his basic necessities of life (house, furniture, clothes, vehicle, etc.) will not be taken into account. It is conditional that the debts were not created for any un-Islamic or sinful purpose.
  • Fi Sabeelillah: Those who are away from home in the path of Allah. Those in Jihaad, those seeking knowledge or a stranded Haji may be assisted with Zakah if they are in need.

Zakah can be given in cash or in the form of clothes, etc

Zakah can be given in installments throughout the year or as a wholesome.

Caution

  • If a person especially of the first two categories mentioned above has wealth (in cash, gold etc) above the level of Nisab, Zakah cannot be given to that person.

Who Do NOT Have to Give Zakat

  • Those who do not have savings up to Nisab level
  • Non-Muslims do not have to give Zakah. They have to pay Jizya (a special tax in Islam for Non-Muslims residing in an Islamic estate)

Who are not Eligible for Receiving Zakah?

  • Descendants of the Holy Prophet (PBUH)
  • Non-Muslims (Islamic state responsibility, if they are poor or needy)
  • A person who has accumulative wealth (cash, gold etc) of more than the Nisab
  • A person who is a dependent e.g. wife, children, parents (however can be given to poor, needy brothers or sisters and even better)

Consequences of Giving Zakah on the Economy

  • From the discussion above, it can be concluded that almost everyone is either eligible to receive Zakah OR give Zakah.
  • One has to be very careful while calculating his/her Zakat and be careful to give Zakat on only whom it is due.
  • If each and everyone in the country annually gave the right amount of Zakah to those who deserve it, this will reduce poverty to a great extent.
  • There will be less public uprising or unrest
  • There will be less financial corruption, thefts, robbery etc
  • Remember how strictly the first Caliph of Islam Hazrat Abu Bakr (RA) dealt with those refused to pay Zakah. He waged WAR against them. Beware!
  • And Allah knows Best

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If there are any questions, one may ask.

Frequently Asked Questions

  1. What is difference between Zakah and taxes? Do we have to pay Zakah if we are paying taxes?

Answer:

Zakah is ordered by Allah

Taxes ordered by state (which may be Islamic or Non-Muslim country)

Zakah is given to the specific eight categories of people mentioned above

Remember Zakat is on one year savings and this includes deduction of taxes paid. So if a person still has enough money to give Zakat even aftet paying taxes, why should he be exempt from paying zakat?

Taxes in general terms are a financial obligation imposed by the state on people, from which the state spends on the public interest, such as transportation, health, education and so on. 

How does one know for guarantee that his/her taxes reach those 8 category of people?

Taxes come under the heading of man-made systems, and are not prescribed by Allah, may He be exalted. As for Zakah, it is divinely ordained and it is one of the greatest acts of worship in Islam.

Some people do not pay Zakah on their wealth, because they think that the taxes they pay to the state are sufficient, but this is not permissible, because taxes are one thing and Zakah is something else altogether.

The scholars Fatwa says: 

“It is not permissible to regard the taxes that the owners of wealth pay on their wealth as coming under the heading of the Zakah on that on which it is obligatory to give Zakah. Rather it is obligatory to give the Zakah ordained by Allah to those who are entitled to it according to shari’ah, as Allah, says in the Holy Quran (9: 60)(to the eight categories of people)”

Therefore, with regard to the taxes that are decreed by the state and imposed on the people, they have nothing to do with what Allah has enjoined upon them of giving the zakah of their wealth.

Besides even the poor deserving people are indirectly paying taxes.

As far as imposing taxes by the state, whether it is permissible or not, that is a different discussion.

2. Is there Zakah on Diamond Jewelry or other Precious Stones?

Answer:

The majority of scholars are of the view that no zakah is due on precious stones unless they are for trade.

Some scholars have added that because of the rocket high prices of diamonds, sometimes even being more costly than gold, Zakah is necessary on diamonds if used as an investment. Explanation has been given above. Some including me add that even if used for adornment Zakah should be paid on diamond.

http://www.islamicperspectives.com/zakah-diamonds.htm

And Allah knows best.

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