ZAKAT is one of the five fundamental pillars of Islam, mandatory on all Muslims who are of eligible wealth. Zakat is due from and payable by a person on his wealth (and not his income), which has remained with him/her for one Islamic year. It is difficult to calculate the completion of one year on each item of wealth, because purchase dates may vary. To overcome this difficulty, a practical method is to fix a date (e.g. 1st of Ramadhan), compute your total wealth on that date and calculate Zakat, thereon.

Zakat on Pure Gold and Gold Jewellery

Zakat should be calculated at 2.5% of the market value as on the date of valuation (In our case we consider 1st of Ramadhan). Most Ulema favour the Market Value prevailing as on the date of Calculation and not the purchase price.

Zakat on Precious and Semi-Precious Stones

There is considerable contention on whether these are to be considered for valuation. In my humble opinion if they have a value, then they calculate towards your wealth, and it is on the wealth that Zakat is mandatory. However please consult with Ulema, before acting on this section. Most Ulema contend that a diamond is a piece of carbon and its value varies, unlike that of gold or silver. One may calculate the Saleable Value of Items-at-hand on the date of Zakat Calculation.

Zakat on Silver.

Zakat is to be paid on Silver in Pure form or Jewellery, Utensils, Decorative items and all household items including crockery, cutlery made of silver at 2.5% of the prevailing market rates.

Zakat on Cash and Bank Balances

Zakat should be paid at 2.5% on all cash balance and bank balances in your savings, current or FD accounts. The amount technically should be in the bank for one year. Usually it happens that the balance keeps on changing as per personal requirements. You may make your best judgement and the best way is to pay on remaining amount on the day of calculation

Zakat on Loans Given, Funds, etc

Zakat is payable by you on loans you have given to your friends and relatives. It should be treated as Cash in Hand. You may deduct Loans Payable by you to arrive at the nett present value of your wealth. However, if you are in doubt, on the return of your money, then you may not calculate it as your wealth. You can add it to your wealth, if and when your receive your money. Zakat is payable on all Govt Bonds, Public Sector Bond, paid-up Insurance premiums, your paid-up portion of Provident Funds, Govt Bills receivables, etc. Pls remember you need to be aware of what the sharia says about Insurance and other types of investments.

 Zakat on Landed Property

Zakat is not payable on personal residential House even if you have more than one and meant for residential purpose only. Also Zakat is not applicable on the value of Property given on rent irrespective of how many. However Zakat is payable on the rental income itself after deducting the maintenance and other expenses. However if your intention of holding properties is to sell at a future date for a profit or as an investment, then Zakat is payable on the Market Value of the property. Also, if your intention of holding properties changes in the current year, i.e. from self use to business then you need to pay Zakat on that Property Value.

Zakat on Business:

This is for Business Persons only. No matter what business you are into, you've got to pay Zakat on all STOCK-IN-TRADE. The stock must be valued at its Landed Cost Price. If you have any bills receivable (sales given on credit) then you need to add the same towards calculations. Deduct the Amounts due to your suppliers and deduct the loans on stock on the date of calculation. Dead Stock should be calculated on scrap value or its saleable value. Damaged stock should also be valued at its scrap value. Be honest in the calculations, as ZAKAT is an INSURANCE on your STOCK directly from ALLAH and who better an insurer than Him. There is no Zakat on Factory Buildings or any kind of machinery, but there is zakat on products produced in the factory (i.e. finished goods value). Please refer to competent Ulema or a scholar who can shed more light on your specific issues.

Liabilities Deductions

If you have any pending tax payable to the govt, as of the date of Zakat Calculation, then the same may be deducted before arriving at the net worth. If you have taken any loans from any person or institution, and if you have not already deducted the same from any of the above sections, then you can deduct your Payables over here. Please be truthful, as Zakat is a sure way of protecting ones wealth if Zakat has been paid on it regularly and fully.

LOANS taken only for Zakatable-Wealth should be deducted. Cars, Houses, etc are not Zakatable wealth. So any loan/mortgate taken for these purposes are not to be deducted.

FOOTNOTE: Please note that RIBA in any form is Haram and strictly prohibited. So please stay away from taking Loans on Interests AND Collection of Interests from anybody or institution or other forms of RIBA'.

Zakat Summery

Zakat is payable at 2.5% of the wealth one possesses above the Nisab- this is the minimum amount of wealth before being liable to pay Zakat . this is equal to 87.48g (30z) of gold, about £850.00

Zakat is payable on gold, silver, cash, saving, investments, rental income, business and merchandise, and profits and bonds.

Zakat is not paid on wealth used for debt repayment or living expenses, clothing, food, housing, transport, education ctc.

Zakat should be calculated at 2.5% of the market value as on the date of valuation (In our case we consider 1st of Ramadhan). Most Ulema favour the Market Value prevailing as on the date of Calculation and not the purchase price.

Zaytun Welfare Trust collects and distributes Zakat to those Muslims who are most in need, in accordance with Qur’anic guidelines.

Please donate your Zakat here