ZAKAT (Compulsary Charity
Zakat is one of the five pillars of Islam. It has been mentioned, along with daily Prayers (Salaat / Namaz), over seventy times in the Qur’an. Allaah’s word commanding “…..and establish regular Salaat and give regular Zakat…..” are referred to in many parts of the Qur’an. From this we can conclude that after Salaat, Zakat is the most important act in Islam.
Charity towards man, in the …widest sense of the word, is the cornerstone of the Islamic society and a constant theme in the Qur’anic teachings. There are two kinds of charities in Islam:
– the obligatory and the voluntary. The obligatory charity is called Zakat while the voluntary charity is called Sadaqah.
Linguistically, Zakat has two meanings: purification and growth. Technically, it means to purify one’s possession of wealth by distributing a prescribed amount to the poor, the indigent, the slaves or captives, and the wayfarer.
The proceeds of Zakat are supposed to be devoted towards:
*Relieving poverty and distress
*Helping those in debt
*Providing comfort and convenience for travellers
*Providing stipends for scholarships
*Providing ransom for prisoners of war
*Propagation of Islam
*Meeting the expenses for the collection of zakat
*Other things beneficial for the society
Zakat is obligatory upon a person if:
#He or she is an adult, sane, free and Muslim.
#He/she must possess wealth in excess of specified minimum (Nisaab) excluding his or her personal needs (clothing, household furniture, utensils, cars etc. are termed article of personal needs).
#It should be possessed for a complete lunar year.
#It should be of productive nature from which one can derive profit or benefit such as merchandise for business, gold, silver, livestock etc.
Types of wealth on which zakat is imposed:
1) Gold and silver, in any form.
2) Cash, bank notes, stocks, bonds etc.
3) Merchandise for business, equal to the value of Nisaab.
5) On income derived from rental business.
The Lawgiver, Allaah has prescribed the minimum amount that is obligatory for Zakat in different ranges of properties, and that minimum amount is known as nisaab. The reason for nisaab is to ensure that no one is forced to give Zakat out of what he or she does not have, and that no wealth goes without Zakat. Nisaab is also an insurance against the tyranny of the state to tax the poor and or the neediest as is the case in many countries. Nisaab is a reference point for the average Muslim who is not sure whether he possesses the minimum wealth on which Zakat is obligatory. The wealthy need not worry about the Nisaab. Zakat is obligatory on their entire wealth and must be paid out at the end of financial year that they set for their Zakat.
The Nisaab will not be valid unless it fulfills two conditions:
1) The amount that has reached Nisaab must be the excess or surplus known as “faadil” from one’s essential needs such as food, clothing, housing, vehicles, tools and machinery that is used in business. The essentials for living are exempted from Zakat.
Although what constitutes nisaab may change from one country to another, the amount that is needed for the basic needs of living in different countries is very similar, because the market place determines the prices, whether it is an official market or a non-official market. In the poorest countries people do without or live below the poverty standard, and that is why many go hungry or without basic essentials.
2) Nisaab must mature, that is the money is not liable for Zakat unless it has remained a full year in the possession of a person. This is the understanding of the majority of the scholars. Imam Abu Hanifah (R) said: “What should be considered is the existence of nisaab at the beginning and the end of the Zakat year set by the payer”. It does not matter if the nisaab money increases or decreases during the calendar year, as we will explain later
This condition does not include farm produce, for it is due on the day it is harvested. Allaah (SWT) stated: “… But render the dues that are proper on the day that the harvest is gathered…” (Al-Qur’an, 6: 141) According to Imam Al-`Abadi, (R) Zakat money is of two kinds: one that by its nature can not be invested and Zakat of this category is due on the day of harvest. This includes all the farm produce that is liable for Zakat. The other is wealth that can be invested in the hope of a good return, like cash, gold or silver, because the opportunity is there that cash in one’s hand can be invested for a good return. This includes currency investment, merchandise and livestock. Their Zakat is not due until they have matured in one full year.
The proof of this condition is the Hadith related by Ibn `Umar (R A) that the Messenger of Allaah (SAWS) said: “He who acquires property is not liable for Zakat on it till a year passes.” According to Ibn Rushd (r) this is the understanding of the majority of scholars, including the four rightly guided Khalifahs.
Calculation of zakat:
Zakat takes the form of a prescribed contribution based on a person’s wealth and income. The rate of contribution varies with the kind of property owned but, on an average, works out to two and half percent of the (2 .5 % ) total value.
If the nisaab is determined, the Zakatable amount is 2.5%, or .025 multiplied by the amount. For instance, if the Zakatable amount is $56,000.00 it will be 56,000. x .025 = $1,400.00.
To calculate Zakat on jewellery etc. one must first determine the gold or silver content and then calculate the Zakat according to current market price.
If the Gold possessed is less than 87.48 grams or if silver possessed is less than 612.36 grams, but the value of both combined is equal to or exceeds the Nisaab of either Gold or Silver, the Zakat will be due.
For stocks (shares held in a company), Zakat is calculated based upon the current market value.
As machinery, land, fixtures and fittings, furniture, buildings etc. are exempt from Zakat; one is allowed to subtract these from the total asset. This could be obtained from annual reports.
For example, if one has shares worth $1000 and machinery, land etc., are worth 5% of the total asset, then deduct $50 for these assets; afterwards deduct the liabilities of the company proportionately to the percentage of shares held. Zakat must be calculated on the balance.
Distribution of zakat:
* Zakat should be given as soon as possible after it becomes due.
* All of the Zakat can be given to one person or to several persons.
* A poor man cannot be paid for his work from Zakat nor can Zakat be given in payment of services, except to the people appointed by the Islamic government to collect Zakat.
* Zakat will only be valid if the recipient is made the owner of that amount. If, for example, a few needy persons are fed a meal from Zakat money, then Zakat will not be fulfilled as they were not made owners of the food.
* Zakat cannot be given for the construction of Masjid, Madrasah, Hospital, a well, a bridge or any other public amenity.
* Zakat can be paid in kind from the same merchandise on which it is due, or alternatively, it could be paid in cash.
Types of wealth on which zakat is not imposed:
# On any metals other than gold or silver.
# Fixtures and fittings of a shop, car, trucks or any delivery vehicle etc., which is used in running business.
# Diamonds, pearls, other precious or semi-precious stones which are for personal use.
# There is no Zakat on personal residence, household furniture, pots and pan, personal clothing, whether they are in use or not.
# There is no Zakat on a person whose liabilities exceeds or equals his assets. (Home Mortgage in this country is not to be counted as personal liability for the Zakat purpose).
Persons who cannot be given zakat:
* Zakat cannot be given to the descendants of Muhammad (SAWS) .
* Zakat cannot be given to parents and grandparents. In the same manner one’s children and grandchildren cannot be given Zakat. A husband and wife cannot give Zakat to each other.
* Zakat contributions cannot be given to such institutions or organizations that do not give the rightful recipients possession of Zakat, but instead use Zakat funds for constructions, investment or salaries.
Virtues of zakat:
Allaah says in the Qur’an:
“The parable of those who spend their wealth in the way of Allaah is that of a grain of corn. It grows seven ears and each ear has hundred grains. Allaah increases manifold to whom He pleases.” (Qur’an 2:261)
It is stated in the Hadith that by giving Zakat the following benefits are derived:
* Gain the pleasure of Allaah.
* Increase in wealth and protection from losses.
* Allaah’s forgiveness and blessings.
* Protection from the wrath of Allaah and from a bad death.
* A shelter on the Day of Judgment;
* Security from seventy misfortunes.
* Zakat, therefore, is a duty enjoined by God in the interest of the society as a whole. While on one hand these charitable contributions provide for the needs of the society, on the other hand the act of giving in the name of Allaah, purifies the heart of the contributor from selfishness and greed.
The punishment for not giving zakat:
Allaah says in the Qur’an:
“And there are those who hoard gold and silver and do not spend it in the way of Allaah, announce to them a most grievous penalty (when) on the Day of Judgment, heat will be produced out of that wealth in the fire of Hell. Then with it they will be branded on their forehead and their flanks and backs. (It will be said to them) This is the treasure which you hoarded for yourselves, taste then the treasure that you have been hoarding.” (Al-Qur’an 9:34-35)