Why and how much Zakat to be paid?
As being a Muslim, after Namaz, Zakat is also the fundamental part of Islam. But this part is only implemented on the person who has such amount or wealth prescribed by Islam.
Zakat means Purification. It’s a type of Tax which we pay to Allah but instead of decreasing our wealth increases. Zakat is obligatory to every Muslim whether sane whose accumulated wealth exceeds the current Zakat nisab value.
Why is it essential to give zakat?
‘You shall observe the Salah and give the obligatory charity
(Zakat), and bow down with those who bow down.’ (Qur’an 2:43)
In a Hadith, it is quoted,
Hazrat Abu Hurairah (Ra) relates that Hazrat Muhammad (saw) said whom
so ever Allah gives wealth, but who do not pay its zakat, his wealth will be
likened for him on the resurrection day to a huge bald snake having two
fangs. It will bite him around his neck and take hold of him with his two
fangs meaning its two jaws and say – I am your wealth and I am your
hidden treasure. Then he recited “and let not those who covetously
withhold of that which Allah has bestowed on them out of his bounty”.
[Sahih al-Bukhari: Book 24 Hadith 486]
What is the Zakat Percentage?
Your Zakat donation should amount to 2.5% of your annual total wealth grew over the year. As an example, if your total assets amounted to 1,816,744, then you would be required to pay 45,414 as Zakat.
How much Zakat I have to pay?
Our Prophet Muhammed (saw) has set Nisab at the rate equivalent to 87.5 grams of gold and 612.4 grams of silver. In today’s world, it is normally a similar amount in your local currency. The value of silver in Hanafi is used to determine the eligibility of the Nisab to pay Zakat. The value of gold is used in other sects. The value of gold and silver changes every day, so your Zakat payment changes somewhat annually.
What do I need to pay Zakat on?
Zakat should be paid on wealth rather than income. Okay let’s take an example of Azam who earns 3,650,823 a year and has 36,508.23 as his yearly savings, in contrast with his annual income, Azam would have to calculate his zakat from his savings i.e. the 36,508.
The things that Zakat is to be paid on include: cash, gold and business assets.
Another commonly asked question is whether Zakat needs to be paid on valuable items such as property or cars. The answer to this question is, no. These items are exempt. However, if you intend to sell these items then it becomes a trading good and Zakat will be due on such items if a lunar year passes from the time of your intention to sell.
The value for Nisab differs according to change in the market price of Gold/Silver:
7 ½ Tolas gold = 87.48g
Price of gold in April 2019 is (a) 5,947.89per gm
Gold Nisab = 87.48 x (a)= 520,321.55
52½ Tolas silver 612.35g
Price of silver in April 2019 was (b) 71.52per gm
Silver Nisab = 612.35 x (b)= 43,803.18
The lowest of these two values, (c) 43,802.56 is the value of Nisab.
If one has in his/her possession mixed wealth (e.g. gold, silver, cash etc) equal to (c) 43,802.56 that has remained in his/her possession for one whole lunar year then Zakat of 2 ½ % (1/40) of the total balance is due.
Zakat on Shares
- If the shares are purchased solely with the mind of reselling them (capital gains), the market value of the shares must be paid by Zakat.
- If shares are bought with the purpose of profiting from the shares,
- If the business is of trading, e.g. cloth, iron, steel, machinery goods, cement, or supplies electric power etc, then Zakat will be paid on the market value of the shares e.g. If a share worth 18,244.00 comprises of the following, then Zakat is only payable on 7,297.60.
- If wealth decreased from the total Nisab over the year but at the beginning and the end of the year, it is equivalent to or greater than Nisab, it shall be considered as the part of Nisab over the whole year.
WHITE GOLD: zakat is also to be paid on white Gold because it is considered as an asset and also that 75% of White Gold consists of real Gold and 25% of other material, so zakat is required to be paid on White Gold.
PROPERTIES: If the property was bought with the purpose of renting not for reselling than Zakat will only be paid on rent and not on the value of the property.
However, Islamic Scholars hold different opinions in this regard.