Zakat is one of the five pillars of Islam: once a year, a Muslim whose wealth is above a minimum amount (the Nisab) gives 2.5% of it to people who are entitled to receive it. The rule is simple, but working out which wealth to count is where most people get stuck. This guide walks through it in five steps, with a full worked example.
Who has to pay Zakat?
Zakat is due from an adult, sane Muslim when all of these are true:
- Your zakatable wealth, after subtracting debts that are due now, is at or above the Nisab.
- You have owned at least the Nisab for one full lunar (Hijri) year, called the hawl. Most people pick a fixed Zakat date, for example 1 Ramadan, and calculate on that day every year.
- The wealth is fully yours (not money you are holding for someone else).
Step 1: Add up your zakatable assets
Count the value, on your Zakat date, of:
- Cash at home and in your wallet.
- Bank balances: current and savings accounts, and the principal of fixed deposits.
- Gold and silver in any form: coins, bars and (for most scholars in South Asia) jewellery. See Zakat on gold and jewellery for the details.
- Business stock held for sale, valued at its current selling price, plus business cash.
- Money owed to you that you expect to get back (loans you gave, unpaid invoices).
- Investments such as shares, mutual funds or property bought to resell. Scholars differ on how to value shares held for the long term, so ask a scholar you trust if this is a large part of your wealth.
Step 2: Leave out what is not zakatable
You do not pay Zakat on things you own for personal use, for example:
- The house you live in, your furniture, clothes and household items.
- Your car, motorbike or phone used personally.
- Tools, machines and shop fittings used to run a business (but the stock you sell is zakatable).
- A plot or flat you own for living in or renting out (the rent you have saved is counted as cash).
Step 3: Subtract debts that are due now
Subtract money you owe that is payable now or soon: a loan instalment due, unpaid bills, a credit card balance. For long-term loans like a home loan, most scholars allow only the instalments due in the coming months, not the whole loan.
Step 4: Compare with the Nisab
The Nisab is the value of either of these, at today's price:
| Standard | Weight | In tola |
|---|---|---|
| Silver | 612.36 grams | 52.5 tola |
| Gold | 87.48 grams | 7.5 tola |
The silver Nisab is much lower, so more people pay Zakat with it. Many scholars, especially in Pakistan and India, recommend using the silver Nisab when your wealth is mixed (cash and savings, not only gold) because it benefits more poor people. If you only own gold and nothing else, the gold Nisab applies.
With example prices of Rs 4,500 per tola of silver and Rs 400,000 per tola of gold, the silver Nisab is Rs 236,250 and the gold Nisab is Rs 3,000,000. Always use the price on your Zakat date from your local market.
Step 5: Pay 2.5%
If your net wealth is at or above the Nisab, your Zakat is 2.5% of all of it (not only the part above the Nisab). A quick way to work it out: divide by 40.
Worked example
Ahmed's Zakat date has come. Using the example prices above, his position is:
| Item | Amount |
|---|---|
| Cash at home | Rs 85,000 |
| Bank balance | Rs 640,000 |
| Gold: 3 tola × Rs 400,000 | Rs 1,200,000 |
| Loan he gave a friend (expects it back) | Rs 50,000 |
| Total assets | Rs 1,975,000 |
| Minus: credit card bill and instalment due | − Rs 120,000 |
| Net zakatable wealth | Rs 1,855,000 |
| Silver Nisab (52.5 tola × Rs 4,500) | Rs 236,250 |
| Zakat due (2.5%) | Rs 46,375 |
His net wealth is above the Nisab, so he pays Rs 46,375. His car and the flat he lives in are not counted.
Who can receive Zakat?
The Quran (Surah At-Tawbah, 9:60) names eight groups, including the poor, the needy, people in debt and travellers in difficulty. You cannot give Zakat to your own parents, grandparents, children or grandchildren, or to your spouse, because you are already responsible for them. Brothers, sisters and other relatives in need can receive it, and many scholars say they are the best place to start.
Common mistakes
- Paying only on savings above the Nisab. Once you reach the Nisab, 2.5% is due on the whole amount.
- Forgetting gold jewellery kept in a locker, or money owed to you.
- Counting your monthly salary as income. Zakat is not an income tax. What counts is what you still have on your Zakat date.
- Mixing up Zakat and Sadaqah. Sadaqah (charity) is voluntary and can be given to anyone; Zakat is an obligation with set rules.
This guide follows the widely accepted rules. Where scholars differ (jewellery, long-term shares, retirement funds), the guide says so. For a complex situation, such as a large business, ask a qualified scholar.