Every year, especially during the month of Ramzan, Muslims in large numbers all over the world pay an obligatory charity called Zakat, the root of which in Arabic means, “purity”. Hence, Zakat is seen as a way of cleansing and purifying one’s income and wealth from what may be at times worldly and impure ways of acquisition, in order to gain the blessing of God. Being one of the five pillars of Islam, the Quran and Hadith give detailed directives regarding how and when this obligation has to be fulfilled by Muslims, a few of which are discussed below:
On what items should Zakat be paid on?
Zakat is levied on wealth of all sorts, livestock of all types and production of all forms. However, means of production, personal items of daily use and a fixed quantity called Nisab are exempted from paying Zakat.
Examples of zakat-eligible assets include savings, stocks, cash, investment properties, business income or precious metals such as gold.
Who should pay Zakat?
Any Muslim who owns wealth more than the Nisab, a minimum amount that a Muslim must have before being obliged to pay Zakat, is liable to pay Zakat. The Nisab is generally taken to be the cash equivalent of 3 ounces/87.48 grams of gold or 21 ounces/612.36 grams of silver. Care should be taken to use the latest rates of gold and silver, as their rates frequently fluctuate in the market.
For example, if the cost per ounce of silver is Rs2,000, then the Nisab will be (Rs2,000 X 21 ounces= Rs42,000). In this case, anyone owning wealth greater than Rs42,000 will be liable to pay Zakat, as long as the wealth has been in his/her possession for at least one lunar year, starting from the day it was first obtained.
While both gold and silver can be used to calculate Zakat, most scholars recommend using silver, as it usually gives a lower Nisab value, meaning more people will be liable to pay Zakat and hence more people will be able to benefit from that money in return.
The Nisab for agricultural produce is set as 5 wasaqs (approximately 653kgs) and the Nisab for livestock it set at 5 camels, 30 cows and 40 goats.
Rate of Zakat:
Zakat is charges at the rate of 2.5 per cent on wealth, 5 per cent on all items produced by the interaction of labour and capital, 10 per cent on item produced by the basic factor of production being only labour or capital and 20 per cent on items which neither result require capital or labour but are a gift of God.
Zakat on livestock varies in the following manner:
(i) Camels: From 5 to 24, one she-goat on every five camels, from 25 to 35, one one-year old she-camel or in its absence one, two-year old camel, from 36 to 45, one two-year old she-camel, from 46 to 60, one three-year old she-camel, from 61 to 75, one four-year old she-camel, from 76 to 90, two two-year old she-camels, from 91 to 120: two three-year old she-camels and over 120, one two-year old she-camel on every forty camels and one three year old on every fifty camels.
(ii) Cows: One one-year-old calf on every thirty cows and one two-year-old calf on every forty cows.
(iii) Goats: From 40 to 120: one she-goat, from 121 to 200, two she-goats, from 200 to 300, three she-goats and over 300, one she-goat on every hundred goats.
Who can receive Zakat?
The Quran categorically mentions eight categories of people who can receive Zakat in the following verse.
“The alms are only for the Fuqara’ (the poor), and Al-Masakin (the needy) and those employed to collect (the funds); and to attract the hearts of those who have been inclined (towards Islam); and to free the captives; and for those in debt; and for Allah’s Cause, and for the wayfarer (a traveller who is cut off from everything); a duty imposed by Allah. And Allah is All-Knower, All-Wise.” [Al-Quran 9:60]
People who cannot be given Zakat include:
(i) The rich
(ii) The strong and able poor e.g. those capable but not willing to work
(iii) The heretic, apostate, those disbelievers actively fighting Islam
(iv) The family of the Prophet (peace be upon him)
(v) Lineal descendants i.e. children and grandchildren
(vi) Lineal ascendants i.e. parents and grandparents