ZAKAT calculator and eligible causes

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ZAKAT how to calculate and how to pay

Muslims around the world pay an annual amount to charity each year. This is called ZAKAT.

HOW to calculate how much to pay?

2.5% is payed on “Excess Wealth”. This is calculated in the following way:

CASH: Your cash assets, which include all monies in your bank account(s) and at home or on your person. Any interest you have received at the bank is haram and must not be included. This is not cash that is required to pay your bills, food and basic living and medical costs. This is savings and disposable income.

GOLD and SIVER: Most scholars are of the opinion that zakat should be paid on all gold and silver jewellery, whether it is worn or not, and even if it is owned by a man (who isn’t permitted to wear gold jewellery). This is the sellable value, not the price you paid for it. Wedding rings are often not included in this, however many scholars do include wedding rings. The total realistic sellable value of your gold and silver jewellery collection is to be added up into one sum. It is the gold and silver that is to be valued.

PROPERTY: Any property other than your home must be considered for zakat. If you are in the business of buying and then selling properties when they appreciate in value, then zakat is due on the current resale value of these properties. However, If you are in the business of letting properties (rather than buying and selling them), then zakat is due on savings made from this rental income only.

PENSIONS: Zakat must be paid on the amount of your pension that you have contributed (voluntary contributions) within your zakat year, but not on the portion paid by your employer or the proportion automatically contributed by law or regulation.

SHARES: If you don’t intend to sell the shares, then zakat is due on dividends you earn from them. However, if you are buying and selling shares, then zakat is due on their current market value.

INVESTMENTS: The return on cash investments / bonds tends to be ‘fixed-interest’ and as such no zakat is due on this haram income. But zakat must still be paid on the initial sum invested.

MONEY OWED TO YOU: If you are owed any debts, and you believe the debt can be recovered on demand, add it here. However, if there is any doubt about when and if you will recover the debt, do not include it here — but include it in the year you actually receive it, and pay zakat for all previous years that the debt was outstanding. If you have already received some of the debt, then zakat is due on this received amount.

BUSINESS VAUE: Add the total value of: cash in tills and at bank + stock for sale (current sale value) + raw materials (value at cost).

Once you have calculated this excess, you then need to deduct your “DEBTS”. These are calculated as follows:

UNPAID DEBTS: Any unpaid rent, house payments, utility bills or money that you owe etc., that are due or overdue should be excluded or deducted from the total ‘EXCESS’.

BUSINESS DEBTS: Any unpaid rent, property payments, invoices, staff salaries or money that you owe etc., that are due or overdue should be excluded or deducted from the total ‘EXCESS’.

Once you have deducted the two “DEBTS” from your ‘EXCESS’ you are left with a total ZAKATABLE amount. Divide this amount by 100 then multiple by 2.5 Eg. If your grand total was $100k then you would: 100’000/100 = 1,000 X 2.5 = $2,500 So your total Zakat to pay would be $2,500 for the year.

WHEN to pay?

Zakat can be paid at any time, once per year as long as it is paid at the same time every year. Should you need to move the payment date calculate the loss or gain of days that year and add or subtract appropriately. Most Muslims pay Zakat during the last 10 days of Ramadan.

WHY do we pay Zakat?

Zakat is one of the five pillars (compulsory acts) of Islam. Islam strongly focuses on kindness and equality. Zakat is an act of kindness and selflessness for the love of Allah (swt) to aid those in need. The payment of 2.5% of one’s excess wealth is intended to cause no harm to the individual paying but is enough to make a life changing or saving change to those who receive it. We all know the statistics about the richest handful of men in the world having more money than the poorest 50% of the planet combined. Zakat is intended to balance this and create a better level of equality and a higher average quality of life.

Where can I pay ZAKAT?

You can pay Zakat to a list of approved causes here.

Can Non-Muslims pay Zakat?

Zakat is compulsory for Muslims, however should a non-muslim wish to contribute then this is a mercy and act of kindness that is always more than welcome. However haram income is not accepted.

What is HARAM income?

Haram income is income generated from act prohibited by Islam. These include: interest, gambling, crime, alcohol, prostitution, drugs and any other source of income that is prohibited by Islam.

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About the Author

Caleb Simmons
Caleb Simmons | Journalist Since: 2003 | New York - Abu Dhabi - London - Barcelona