Giving Zakath-Based on Wealth

Zakat is a part of the wealth and property that Muslims must pay annually, to help the poor in their community. Different kinds of wealth and possessions for which Zakat is compulsory has been categorized into three according to their nature. They are monetary assets, livestock, and agricultural returns. Likewise, Zakat is levied on specific assets only as identified by Shariah (Islamic Law and based on certain conditions.

(a) Complete ownership

(b) Assets having potential for growth

(c) Wealth other than what is needed for basic needs and repayment of debts

(d) Completion of one year period (agricultural income should be calculated at the time of harvest)

(e) Calculation of Nisab (minimum amount eligible for Zakat)

MONETARY ASSETS:

Zakat should be paid in the currency that is used in the land. Zakat is also liable for gold and silver that is held for a year. The amount to be levied was determined by Prophet Muhammad (Peace and Blessings be upon him). Zakat was obliged upon the two currencies, which were gold and silver at his time. It was determined as a quarter of the tenth (2.5%) in gold and silver. The amount was levied from a specific sum, which is the Nisab or over. Nisab equates to 200 silver Dirhams. One Dirham is reckoned to be equal to 2.95 grams. Hence, the Nisab of silver is 590 grams of silver. If the amount is less than the Nisab, nothing need to be taken from it. If one holds monetary assets worth above and over the market price of 590 grams of silver, Zakat at the rate of 2.5% has to be paid on the amount. In poultry and fish farming, the calculation of one’s assets can be done in a similar manner for payment of Zakat.

AGRICULTURAL RETURNS:

Zakat on food grains should be paid if the yield exceeds the quantity that is required to get 6 quintals after the husk is removed. Hence if a person harvests paddy that will give him more than 6 quintals of rice, then he is obliged to give Zakat on it. In our land, there prevails a false notion that Zakat is not applicable to any other crop than paddy. Zakat is to be paid on all crops that are cultivated for the purpose of earning agricultural returns. It is not right to avoid paying Zakat for crops like coconut, areca nut, pepper, cashew, tapioca, plantain, rubber etc. This is confirmed by the Qurânic verse: "But render the dues that are proper on the day that the harvest is gathered." (Surah Al-An`am, Verse: 141). Prophet Muhammad (Peace and Blessings be upon him) said: "A tenth is payable on what is irrigated by rivers, or watered by rains, and a twentieth share on what is watered by water carried by camels." (Muslim) Hence, Islamic scholars unanimously agree that the tenth or its half is due on what land produces as a whole, even if they disagree in some details. At the same time, any rare crop that is grown in a particular region does not come under the purview of Zakat.

The rate of Zakat varies proportionately according to the method of irrigation employed during the course of farming. Should the trees or crops be watered naturally, such as rainwater and the like, i.e. without cost to the owner, the rate is one tenth (10%). But, if they are watered with an extra effort (and cost) such as well water, or irrigation using motors and the like, the rate of Zakat is half of one tenth (5%). Prophet Muhammad (Peace and Blessings be upon him) said: "No Zakat is due on grain or fruit until it reaches five wasqs." (Muslim) Five Wasqs are equal to 653 Kilograms. Zakat should be paid at the time of the harvest.

LIVESTOCK:

Zakat is liable upon various animals if they are kept for a year for grazing, the Nisab is different depending on the animal, and no Zakat is due on camels until they are more than five in number. Other animals that Zakat is liable upon are cattle, lamb, sheep, and goats. The Nisab is progressive which increases with the number of animals.

Zakat has to be paid for the possession of animals such as camels, cows, lamb, sheep, and goats. Zakat is not necessary on less than five camels. When a person has five or more than five, but less than twenty-five, then on every five camels, one goat has to be given as Zakat. The goat given as Zakat can be male or female, but should not to be less than one year old. If he has more than one Nisab but less than two Nisab (more than five but less than ten) then Zakat on the extra amount is forgiven and is not necessary, meaning if there are seven or eight, then only the one goat is necessary. If he has twenty-five camels, then one small camel that is more than one year old and less than two years old has to be given. The same rule applies to up to thirty-five camels. If a person possesses between thirty-six and up to forty-five, then one camel more than two year's old has to be given. If one has less than thirty cows then Zakat is not necessary. If a person has thirty, then the Zakat is one calf that is more than one year old. If he has forty, then the Zakat is one calf older than two years. If he has less than forty sheep or goats, then Zakat is not necessary. If he has between forty and one hundred and twenty, then he should give one goat or sheep, which means that regardless of any quantity between these two figures, only one goat need be given. Two goats are given for the quantity between one-hundred and twenty one and two hundred and so on.

BUSINESS WEALTH:

If one has a business, then all revenue made during the year has to be included for calculation of Zakat. If he receives rent from buildings, automobiles etc. it has to be included as his income for calculating Zakat. If he has received rent from rental properties, he can deduct from the income all associated expenses, such as repairs, insurance, loan payments, property tax, and estimated income tax on the rent. There are two relevant opinions on how Zakat is to be paid in such cases. The first is to calculate the value of the possessions as well as net income and pay Zakat at the rate of 2.5%. The second method is to disregard the value of the possessions and pay 10% Zakat for the earnings in the same way as is done in the case of agricultural income.

Zakat has not to be paid for one’s possessions such as house, building, land, vehicle, home appliances, equipments, furniture etc. that are meant only for personal use and are not for sale or lease. If such things are meant to be sold or leased out in order to earn income or profit, naturally they are to be considered as business wealth and Zakat has to be paid for them. Zakat is liable on merchandise, which is used for trading for the sake of profit e.g. foodstuff, clothing, furniture, manufactured goods, animals, minerals, land, buildings and other goods that are bought and sold. Houses, land, vehicles, home appliances, etc. can also under business wealth if they are meant to be sold in order to earn profit. When the time for paying Zakat is due, the trader, if he is a Muslim, has to assess the present market value of the entire stock that he has with him. The cash at hand and receivable amounts have to be added to it. After deducting the amount of loans to repaid, if there are any, Zakat has to be paid at the rate of 2.5% on the entire amount that exceeds the Nisab.

INCOME FROM SHARES:

Possession of shares is tantamount to virtual partnership in the ownership of a company. The rise and fall of fortunes of the company affect the market value of its shares. Such fluctuations naturally affect the shareholders. This equity culture has become the backbone of today’s industrial growth. It also provides the facilities for the shareholder to sell off his stakes in the company at any time he wishes. People who hold shares of companies in their possession are liable to pay Zakat on their holdings as per the following stipulations:

1.When the time for paying Zakat is due, the market value of the shares in possession has to be calculated and 2.5% Zakat has to be paid on it.

2.If the shares have been purchased only with the intention of getting dividends, the total receivable dividend for the year has to be calculated and 2.5% Zakat has to be paid on it.

3.If the amount to be received as dividend is not known, the dividend received so far has to be added to the other incomes and 2.5% Zakat has to be paid on it.

INCOME FROM BONDS:

Bonds involve receiving of interest which is prohibited in Islam and hence one should keep away from it as far as possible. The principal amount that has been invested in bonds is liable for Zakat. The principal amount has to be included every year while calculating one’s wealth and Zakat at the rate of 2.5% has to be paid on it.

INCOME FROM INDUSTRIES:

Zakat for industrial firms is 10% if it is calculated on the basis of the total value of finished and unfinished goods from which all production expenses are deducted. If the total value of the industrial unit is taken into consideration, Zakat at the rate of 2.5% has to be paid on it. In this case, the cost of land, building, and machinery need not be taken into account.

SALARY:

Salary or similar remunerations are liable for Zakat at the rate of 2.5% after deducting the amount required for the maintenance of the family and other basic expenses.

JEWELLERY:

Differences of opinion regarding Zakat on ornaments have existed even from the time of the Sahabas. Though the minimum ornaments worn regularly by women are not counted for Zakat, it is obligatory for them to pay Zakat on jewellery that exceeds Nisab. 85 grams of gold is considered to be the value fixed for Nisab. The market value of 85 grams of gold is deducted from the total value of all jewellery and 2.5% of this difference amount is paid as Zakat. This is the generally accepted rule, though there is a prominent school of thought which says that there is no Nisab on jewellery and that 2.5% Zakat has to be paid on whatever jewellery that a women has. Women usually have an inclination to assume that the calculation and payment of Zakat are not their duties, and that they are the domains of the males in the family. Every male and female who has wealth over and above Nisab has to pay Zakat according to the prescribed rates. There is no discrimination between male and female in this matter. The jewellery in a household is the wealth of the women in the family. Utmost care should be taken to ensure that all the wealth is purified and increased in such a way that it ensures reward in the hereafter and salvation from hellfire. Once a woman came to Prophet Muhammad (Peace and Blessings be upon him) and she was accompanied by her daughter who wore two heavy gold bangles in her hands. He asked her: “Do you pay Zakat on them?” She said: “No.” He then said: “Are you pleased that Allah may put two bangles of fire on your hands?” Thereupon she took them off and placed them before the Prophet (Peace and Blessings be upon him) saying: “They are for Allah and His Apostle.” (Abu-Dawud Book9, Number 1558)