Zakat

Zakat is an obligatory duty and one of the five pillars of Islam. It is mandatory when two conditions are simultaneously satisfied which are Nisab and the Due Date.
 

Nisab is the exemption limit for the payment of Zakat. In other words, it is the amount which
savings or capital or product must exceed in order for the Muslim owner to be obliged to give zakat. Nisab amount calculated based on 3 oz of pure Gold which is $4,552 as of 7/06/2011.
 

Zakat is due after one Lunar (Hijri) year starting from either the first day you acquired the amount of Nisab or the day you paid Zakat last year. The month of Ramadhan is considered to be the best time to pay Zakat.

Zakat is 2.5% of all zakatable wealth that has been in your possession for a lunar year. If your
wealth amounts to less than a threshold figure, termed the nisab, then no zakat is payable. This
threshold limit is 87.48g (3oz) of gold, or its equivalent in cash.

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.

e,g Ahmed owns only £50. However he also owns two cars, one is in excess of his basic needs. To find out if Ahmed is eligible to receive zakat, the value of his second car will have to be taken into account.

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 (Allah bless him and give him
peace).

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.
 

e.g (a) Zubair possesses assets worth £10,000, but owes his creditors a total of £7,000. When his
zakat year has elapsed, he will pay zakat on £3,000.

(b)Shuayb has savings of £2,000, and an £80,000 mortgage which he pays in monthly instalments of £400. His zakat date comes round just as his monthly payment is due, so he pays zakat on £1,600.
 

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.
 

What is Nisab and its current value?
 

When is Zakat due date?
 

How much to pay?
 

Who to pay?
 

I have debts, do I pay zakat?
 

Zakat on Business

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Courtesy of Islamic Relief