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2011-15. All rights reserved. Ethica Institute of Islamic Finance is a training, certification, and advisory company.
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What Is Zakah?
Zakah is a Divine obligation It is the right of the poor over the rich Withholding Zakah is equivalent to depriving the poor of their God-given right
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In their wealth there is a known share for the beggars and the destitute (Quran 70:24-25) Take alms from their property that you may purify and sanctify them and pray for them. Verily your prayers are a comfort for them (Quran 9:103)
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What Is Nisab?
Minimum amount of wealth upon which Zakah is payable The financial floor above which an individual is considered Sahib-in-Nisab and liable to pay Zakah The Nisab limit was set by the Prophet (Peace be upon him) at 20 Mithqal which is equivalent to: 87.48 grams of gold 612.36 grams of silver
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What Is Nisab?
To determine current equivalent of the Nisab limit, one must establish market rate for a gram of gold and silver Zakah payable if: Zakatable assets + (Debts owed to one) (Debts owed to one)
=> Nisab
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What Is Nisab?
Zakah is payable at a rate of 2.5% on all assets Lets say the Nisab is $600 Example 1 Hamids Zakatable assets are valued at $10,000 He owes $7,500 to a friend His Zakatable assets are $10,000 - $7,500 = $2,500 Hamids Zakah liability is 2.5% of 2,500 = $62.5
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What Is Nisab?
Example 2 Jamals Zakatable assets are valued at $3,000 Jamal owes $2,500 to various people His Zakatable assets are $3,000 - $2,500 = $500 Jamals Zakatable assets are below the Nisab level, he is not liable to pay Zakah
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3. Business Assets
I. Property and other fixed assets Zakah treatment is based on the following purchase intentions: i. Intention to retain ownership of asset ii. Intention to reside in property iii. Intention to resell asset iv. No intention
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No Intention
If there is no clear intention for purchasing an asset Zakah is not payable on it Any profit received as rent is subject to Zakah
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3. Business Assets
II. Raw material, Work-in-progress, Finished goods Subject to Zakah as they are purchased with the intention to resell
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3. Business Assets
III. Shares / Equity Investments / Trusts If purchased with intention to resell, they are subject to Zakah If purchased as investment to generate returns, Zakah is due only on Zakatable assets
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Date Of Distribution
Zakah should be distributed exactly one year after an individual becomes Sahib-in-Nisab
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Validity Of Zakah
Zakah is valid if: Zakah payer makes a clear intention upon payment Recipient meets Zakah eligibility criteria Recipient receives ownership of assets given to him as Zakah
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Missed Zakah
Zakah payments missed in previous years due to ignorance or negligence must be calculated and paid
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