Practical Guide for Calculating Zakat

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Basic Zakat Terminology:What is Zakat?

The literal meaning of Zakat is “to purify, togrow, and to increase.” It is an obligatory act ofcharity ordained by Allah, Subhanahu wa Ta’ala(The Gloried and Exalted), to be performed byevery sane, adult Muslim who possesses a certainminimum amount of wealth/assets (called Nisab)for a complete Hijri lunar year cycle. It is an act ofworship (ibadah) and not a tax.

Zakat is owed on specic assets only, identiedby Islamic Law as assets having the potential forgrowth, called “Zakatable Assets.”

Zakat is the compulsory transfer of ownership of aportion of the wealth of the giver, calculated at therate of 2.5%, to poor and deserving Muslims whoqualify to receive Zakat according to Islamic Law.

Zakat is calculated after the passing of a completeHijri calendar year on the market value of all Zakatable

Assets after deducting Zakatable Liabilities.

What are Zakatable Assets?1

Assets which have the potential to grow areZakatable Assets.

Assets on which Zakat was due during theearly Islamic Era and are still applicableinclude: gold, silver, business merchandiseinventory, livestock, agricultural produce, buriedprecious metals or minerals (rikaz), prots frominvestments, accounts receivable, real estatebusiness investment inventory (acquired for gain).

Assets on which Zakat is due today whichwere not prevalent in the past include: cash,stocks, mutual funds, stock options, employee stockpurchase plan, private companies, corporations andpartnerships, retirement plans (401K, IRA, etc.),real estate business investments in property owning

companies, trusts, lump sum payments in terms ofcompulsory pension and provident funds, severancepackages, income-tax refund.

1. Please keep in mind that any asset that involves interestis considered unlawful (haram) in Islam. Muslims must bevery careful to avoid such nancial dealings in order to please Allah (SWT) and to keep their wealth puried and blessed.

“Allah will destroy Riba (usury) and will give increase forSadaqat (deeds of charity, alms, etc.) And Allah likes not thedisbelievers, sinners.” [Al-Qur’an 2:276]

“O you who have believed, fear Allah and give up whatremains [due to you] of interest, if you should be believers. And if you do not, then be informed of a war [against you]from Allah and His Messenger. But if you repent, you mayhave your principal - [thus] you do no wrong, nor are you

wronged.” [Al-Qur’an 2:278-279]

What are Zakatable Liabilities?

Any liabilities on Zakatable Assets areZakatable Liabilities, and one should their value from their total Zakatable For example, the amount owed for agold or silver jewelry, or borrowed which you have to return are both exam

Zakatable Liabilities.

What are Non-Zakatable Assets

Any possessions that are not of pronature, even if they exceed one’s neeNon-Zakatable - provided they are not infor business gain/prot. This can incluassets as: cars, utensils, furniture, homused for business purposes (such as aone lives in, etc).

Lastly, if one’s total Zakatable Assets arthe value of Nisab, all their assets will bZakatable.

What are Non-Zakatable Liabili

Liabilities due on Non-Zakatable Asscalled Non-Zakatable Liabilities. Non-ZaLiabilities can not be deducted from Za

Assets. Examples of Non-Zakatable Linclude: a loan on the house one lives inon a car one uses for transportation, liwhich one must pay back, etc. Becaudoes not pay Zakat on the house theyor the car they drive - then they can notthe money owed on such things from thZakatable Assets.

What is Nisab?

The minimum amount of Zakatable Assetmakes one liable to pay Zakat is calledIn other words, any person who posses

minimum amount of assets, or Nisab, Hijri lunar year cycle (hawl) is obligatedZakat. Similarly if one does not have Ntheir possession for the entire Hijri luncycle, even if for just one day - they have to pay Zakat and are actually elireceive Zakat.

Nisab is nothing but a yardstick to nd oshould pay Zakat and who should not, acan accept Zakat and who can not. Iteffect in calculating a person’s Zakat.

What is Hawl?

The passing of one full lunar year cyclethe Hijri calendar is called Hawl.

© Hidaya Foundation (July 2012) - Signicant time, effort, and consultation with scholars has been put into the preparadocument. Distribution of this article/guide in its entirety is permitted provided the source is attributed to Hidaya Founda

changes are made to the original content, so as not to circulate incorrect information.

A Practical Guide forCalculating Zakat

Hidaya Foundation 765 Scott Blvd., Suite # 115anta Clara, CA 9505066-244-3292 or 866-2HIDAYA

[email protected]

US based 501(C)(3) Non-Prot Organization

ax ID # 77-0502583

Includes: Basic Zakat Terminology

● What is Zakat?

● What are Zakatable Assets?

● What are Zakatable Liabilities?

● What are Non-Zakatable Assets?

● What are Non-Zakatable Liabilities?

● What is Nisab?

● What is Hawl?

How to Calculate Nisab

Practical Examples of how toCalculate Zakat

How Should you Give Zakat?

Who Should Receive Zakat?

Which Relatives Can and Can NotReceive Zakat?

The Purpose of “A Practical Guide forCalculating Zakat”

Hidaya Foundation’s Mission How Does Hidaya Distribute Zakat?

References

d perform As-Salat (Iqamat-as-Salat),d give Zakat and obey the Messengeruhammad, peace be upon him) that you mayeive Mercy (from Allah). (Al-Qur’an 24:56)

rrated by Ibn ‘Umar: Allah’s Apostle (PeaceUpon Him) said: Islam is based on (theowing) ve (principles): To testify thatne has the right to be worshipped but Allah

d Muhammad is Allah’s Apostle; to offer thempulsory congregational) prayers dutifullyd perfectly; to pay Zakat (i.e. obligatoryarity); to perform Hajj. (i.e. PilgrimageMakkah), and to observe fast during thenth of Ramadan.

hih Al-Bukhari, Vol.1, Book 2, No.7]

(866) 2-HIDAYA |www.hidaya.org

Hidaya Foundation


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Figure 3

In this graph, $3,000 is the amof wealth owned in Ramadan, wexceeds Nisab. During the yeafuctuates - sometimes going belowabove Nisab. The individual’s relevlunar year however only begins othe wealth goes above Nisab in month of Safar and remains above for one complete year until next SaHence, Zakat will be due in Safar oncomplete amount, which is $6,000.

$3,000

Ramadan RamadanSafar

In this graph, $3,000 is the amount ofwealth owned in Ramadan. This amountexceeds Nisab (calculated accordingto the Nisab of silver.) During the year itdecreases but does not go below Nisab.In this case, Ramadan will be countedas the beginning of the relevant lunaryear and Zakat will be due on the amountof wealth in possession during nextRamadan, which is $6,000.

$3,000

$6,000

$0

Ramadan Ramadan

Nisab

Figure 1

In this graph, $3,000 is the amount ofwealth owned in Ramadan. This amountexceeds Nisab. During the year the amountdecreases, then increases to $6,000. Then,wealth decreases again before increasingto $4,000. Despite these fuctuations, theamounts do not go below Nisab. Hence, therelevant Zakat year will begin in Ramadanand Zakat will be due on the amount ofwealth in the next Ramadan, which is $4,000.

$0

$3,000

$4,000

Ramadan Ramadan

Nisab

$6,000

Figure 2

kat Calculation for a Person whose Assets have Just Reached

ove Nisab:

A person who has just started earning or has acquired some Zakatablesets for the rst time as a gift should note down the date and monththe Islamic calendar year once their assets reach Nisab. This date willthe starting point of the Hijri lunar year cycle, in which Zakat would bee after the completion of one year from that date. (See Figures 1 and 2)

f this person’s Zakatable Assets stay above Nisab for an entire Hijri lunarar, then Zakat is due on that same Hijri date one lunar year later. Thesh value of all Zakatable Assets in their possession at that time should beculated, and 2.5% of that value should be given as Zakat.3

f this person’s Zakatable Assets falls below Nisab at any time duringe Hijri lunar year, then the year cycle will restart only after their assetsain reach the value of Nisab. They should again note down the date and

onth of the Islamic calendar year which their assets reached Nisab, ands date will be the new starting point of the Hijri calendar year in whichkat will be due at the end. (See Figure 3)

ample 1:

dullah is 22 years old and he has just started working at his rst job threeonths back. On July 1, 2012 (Shaban 12, 1433) after receiving his payeck, he has accumulated $600, which is above the Nisab (of silver of thaty). Therefore, he notes down the Islamic month and date as per the Hijriendar (Shaban 12, 1433) to mark the starting date of the Hijri lunar yearwhich Zakat will be due at the end. If Abdullah’s total accumulated cashd other Zakatable Assets remain above the level of Nisab for the entire Hijriar year, he will owe Zakat on the total Zakatable Assets in his possessionShaban 12, 1434.

Nisab for Gold and Silver:

According to a hadith2, Nisab can be according to the value of 20 dinar/20 mithqalof gold ~ (87.49 grams), or 200 dirhams/5 awaq of silver ~ (613.35 grams).

• To nd out the value of 87.49 grams of gold or 613.35 grams of silver,one must rst nd out the current value of gold or silver in the uctuatingnternational market which can be found at www.kitco.com or www.goldprice.org.

For example, on NY spot gold and silver markets, on July 16, 2012:• The price of gold was approximately $51.07/gram. Therefore, the Nisab

for gold was approximately $51.07/gram x 87.49 grams = $4,468.42

• The price of silver was approximately $0.88/gram. Therefore, the Nisabfor silver was approximately $0.88/gram x 613.35 grams = $538.54

f a person has wealth of nothing else but gold, then Nisab will be calculatedaccording to the Nisab of gold, similarly for silver. But if a person has wealth

How to Calculate Nisab:

Practical Examples of How to Calculate Zakat:

comprising of gold, silver, cash, and other Zakatable Assets, in that cacalculating one’s Nisab - scholars have different opinions on whether one suse the price of gold or silver. The opinion of the majority of Hana scholars Nisab should be according to the value of silver so more poor people may be

Nisab for Cash:

• The Nisab for cash is equivalent to the Nisab of gold or silver, whichever (per scholars), in order to benet more Zakat recipients. During the early IsEra, the value of Nisab for 20 dinar/20 mithqal (87.49 grams) of gold was to the Nisab for 200 dirhams/5 awaq (613.35 grams) of silver. Over the lastplus years, there has become a big difference between the two.

• Presently, the Nisab of silver is less, so Zakat on cash can be calculated accoto the Nisab of silver, which on July 16, 2012, was $538.54.

Nisab for other Assets:

• The values of all other Zakatable Assets, including business merchashould be converted into cash, and dealt with similar to how cash is dealt w

• Nisab for agriculture products including wheat, barley, dry dates, dry raisins, rice, etc. is estimated at approximately 900 kg/5 awsaq. (1 wasq = 60 sa, 1 sa = 3 kg)

Hidaya Foundation

or help with calculating your Zakat or any other Zakat related questions, email us at [email protected]

Nisab Grams Ounce Troy oz.

Gold 20 dinar/20 mithqal 87.49 3.086 2.8125

Silver 200 dirhams/5 awaq 613.35 21.635 19.6875

Let’s suppose that on August 3, 2012 (Ramadan 15, 1433), A

has accumulated $1500. In order to get to and from work morhe buys a car for $1200, leaving him with only $300 in his possThe car is a Non-Zakatable Asset, because it has no growth poConsidering the $300 (which is now below the level of Nisab) is Zakatable Asset, he no longer has to pay Zakat on Shaban 12Instead, once Abdullah again accumulates cash at or above Nishould again note that date to pay Zakat on his total Zakatable Ayear from that date. In the mean time, until that year is over, Ais not liable to pay Zakat (obligatory charity) but he can pay S(non-obligatory charity) as much as he likes.

Example 2

Aaminah is 14 years old. She has two gold earrings and a gold nwith a locket, all of which is worth about $400. On June 15, 2012

25, 1433), her parents gave her $200 for completing the 8th grade,aunt also gave her $100 for acquiring good grades. With this $300 and $400 in gold, Aaminah now has Zakatable Assets worth $700, above Nisab (of silver). So she notes down Rajab 25, 1433, knowif she stays above Nisab for a Hijri lunar year, she will owe Zakat o

25, 1434.

Let’s suppose two months after on August 15, 2012 (Ramadan 27 Aaminah gives $200 in Sadaqah (non-obligatory charity) to helpchild. This leaves her with total Zakatable Assets of $500, whicthan the Nisab (of that day), hence she will no longer have to paon Rajab 25, 1434. Instead, once Aaminah again accumulates Za

Assets at or above the level of Nisab, she should again note that datbeginning of the Hijri lunar year before Zakat is due on her total Za

Assets a year from that date (so long as her total Zakatable Ass

above Nisab).

_____________________

2. Sunan an-Nasa’i, Vol. 3, Book 3, Hadith 2486

___________________

hih Al-Bukhari, Vol. 2, Book 24, Hadith 534


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Assets Total ($) Assetssubject toZakat ($)

Asseexemp

Zakat

Gold and Silver (metal, excluding jewels)

Cash on hand and at bank

Stocks and Mutual Funds (at market value)

Stock Options

Business Merchandise Inventory

Private Companies, Corporations and Partnerships

Retirement plans, 401K/IRA/etc.

Real Estate Investment (as businessmerchandise inventory, e.g. 2 houses)

Immovable property acquired forinvestment (and not to resell), whether

company owned or privately owned

x

Accounts Receivable

Prots from Investment

Trusts (yearly amount)

Severance Package

Loan account in companies - amount ofincome credited to loan account (excludingcapital introduced)

House (which you live in) x

Furniture and household effects x

Motor vehicles x

Diamonds and precious stones (not for business) x

Plant, machinery and xtures and ttings x

Trade debtors

Stamp collection x

Paintings x

Loan debtors Pledges, Deposits x

TOTAL ASSETS

Table A: Zakatable Assets Calculation

Liabilities Total ($) Deductible($)

NoDeduct

Home Loan Payment x

Bank overdraft (to fund stocks & trade debtors only)

Trade creditors

Installment sale and lease creditors to fundmotor vehicles/plant and equipment

x

Any other liabilities incurred in respect ofan asset on which Zakat is not payable

x

Loans to nance business merchandiseand/or trade debtors

TOTAL LIABILITIES

Table B: Zakatable Liabilities Calculation

Summary USD

Total value of assets subject to Zakat (Table A)

Deduct liabilities relating only to assets subject to Zakat (Table B)

NET AMOUNT subject to Zakat (Table A -- Table B)

Zakat = $ NET AMOUNT x 0.025 (2.5%)

Table C: Final Computation Table for Calculation of Zaka

www.hidaya

akat Calculation for a Person whose Assets haveeen Above Nisab for Several Years, but has notroperly Given Zakat:

A well-off person whose Zakatable Assets arensistently above the Nisab does not have to note downe date and month of their assets reaching the Nisabvel, as Allah (SWT) has Blessed them with plentifulealth. Instead, they should immediately pay for thest year, and remember that date on the Hijri calendar,d pay Zakat on their total Zakatable Assets on that

me date each Hijri calendar year.If for whatever reason, a person owes Zakat from thest several years due to not paying it properly or notying it at all, scholars of Hana school of thought sayat such people should put their best effort to calculateZakat from previous years that they owe and pay

off as soon as possible to complete their obligationwards Allah (SWT) and the rights of the poor.4 In caseis difcult to pay off the past years of Zakat due tohatever reason and the person can not do so in theiretime – it is necessary (wajib) to add what they owe ofkat to their will, and it should be paid to the deserving

om their estate before distribution among heirs.

here is another more lenient opinion by other scholars

which such people should repent and regret theirtions of not paying Zakat in the past and only paykat that year, and each year thereafter (on that samejri date). However, this person should give as much

daqah as they can.

xample 3:

uslim is 45 years old and has a wife and three children.th the Blessings of Allah (SWT), he has been steadily

mployed for 23 years in a good job and has alwaysssessed far more than the Nisab all those years. He isry kind and has always given Sadaqah (non-obligatoryarity), but never really had a clear idea about Zakat

bligatory charity) and that it has to be calculatedoperly and given rst before any other kind of charity.hile he was giving charity, he never made the intentionr giving Zakat, and therefore never calculated to makere that he was paying the proper 2.5% of his totalkatable Assets.

ecently Muslim received “A Practical Guide forlculating Zakat” and it encouraged him to sit andlculate his Zakatable Assets. When doing so, he foundat his Zakatable Assets are worth $200,000, which isr above Nisab, and for the last 23 years his Zakatablesets have always been above Nisab.

rst of all, Muslim should repent for his past wrongtions (make tawbah), then he should immediately

y Zakat of 2.5% on his current $200,000 of Zakatablesets, which equals $5000, and continue paying everynar year on that Hijri date henceforth.

he follows the opinion mentioned above of scholarsom Hana school of thought, he would additionally dos best to calculate how much he had to pay for the past years which he did not pay, and make a plan to payoff during his life time insha’Allah. If for some reason is in a bind and can not do so, then he should adde amount of owed Zakat to his will, and that unpaid

mount should be taken from his estate and given to theserving before distribution among his heirs.

_____________________

ahih Muslim, Book 6, No. 2554


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The Purpose of “A Practical Gfor Calculating Zakat”:

Given the fact that worldwide poverty is racombined with the realization that the mof Muslims today don’t properly know calculate their Zakat (especially given tforms of income that were not prevalenpast), Hidaya Foundation took the chto consult with scholars and come up wpractical guide to help Muslims fulll this robligation and the rights of the poor.

With regards to calculations (and s

information throughout this documwe have followed the Hana schthought. Information on other sof thought may be found by reseaFiqh (Islamic Jurisprudence) booconsulting scholars.

Hidaya Foundation’s Missio

To implement educational, environsocial welfare, and health care progreconomically depressed areas of SoutWest Africa and North America, with foprojects which promote self-employmen

How does Hidaya Distribute Za

Hidaya Foundation collects and distZakat donations for various projects acto Al-Qur’an (9:60) and as instructdonors.

Zakat funds are used to support owidows, poor elderly, families in epoverty, poor young women for madeserving students, poor medical patienpeople affected by disasters.

The projects where Zakat donationutilized are: No Orphan without EduJob Skills Training, Spread Education, SHidaya Schools, Hidaya Institute of Fand Agriculture, Clean Drinking Water,

Assistance, Medical Camps, Basic CoSkills, Network Administration Training, SDevelopment Training, System AdminiTraining, Animal Farming, Farmer AssiSmall Businesses for the Poor, DisasterMarriage Support, Widow/Orphan SuppoMillion Meals, and Zakat Distribution.

References1. The Holy Qur’an

2. Hadith (Bukhari, Muslim, Abu Baihaqi, At-Tabarani, etc.)

3. M. S. Omar (1991): How to CalculaZakah. Durban: AlBaraka Bank.

4. Taleemul-Haq, An Authentic compila

the Five Fundamentals of Islam, KDarul Ishat.

5. Research Division, Darussalam (2001)and Fasting. Riyadh: Darussalam.

6. Shaykh Abdur Rahman ibn Yusuf Zakat Workshop. San Jose: South Bay

Association.

7. Shaykh Yusuf Talal DeLorenzo: www.minvestor.com

For more in depth informatioadditional topics about Zakat, a

a functional Zakat Calculator, plevisit: www.hidaya.org/zak

How Should you Give Zakat?It is obligatory to make an intention (niyyah) for thefulllment of Zakat, similar to how we make intentionfor our 5 daily prayers (salah), fasting (sawm), andpilgrimage to Makkah (hajj). If the intention is notmade, the Zakat will not be valid. While giving, theintention should be that “I am giving this as Zakat.”It is not necessary to reveal to the deserving personwhom the Zakat is being given to that it is Zakat.

It is better for an individual to pay his/herZakat directly to deserving people, if possible.However, if that is difcult for them, then theymay assign the responsibility to a trustworthy

individual or organization. It is the individual’sresponsibility to ask questions from whoever isdistributing their Zakat regarding what kind ofpeople their Zakat is being distributed to, howand why they are selected, etc. Remember,Zakat is obligatory on every Muslim and if it isgiven to Non-Zakat deserving person(s), theobligation may not be fullled.

Who Should Receive Zakat?There are eight groups of people on whom Zakatshould be spent, as mentioned in Al-Qur’an: “Thealms are only for the Fuqaraa (the poor), and theMasakeen (the needy) and those employed tocollect (the funds); and to attract the hearts of

those who have been inclined (towards Islam);and to free the captives; and for those in debt;and for Allah’s Cause, and for the wayfarer (atraveler who is cut off from everything); a dutyimposed by Allah. And Allah is All-Knower, All- Wise.” [At-Tawbah, verse 60]

The verse above describes the following eightgroups of people:1. Fuqaraa: Those who own property in excess of

basic necessities but below the value of Nisab

2. Masakeen: Persons of extreme poverty whopossess no wealth whatsoever

3. Aamileen: (Zakat collector) According toScholars, those persons who are appointed by

an Islamic Government to collect Zakat. It is notnecessary that this be a needy person

4. Muallafatul Quloob: Those poor and needypersons who are given Zakat with the intentionof solidifying their hearts because they may berecently converted to Islam or to help bringthem closer to Islam

5. Ar-Riqaab: Slaves whose masters have agreed toset them free on a payment of a xed amount,Zakat may be used to purchase their freedom

6. Al-Ghaarimeen: A person whose debts exceedhis assets and his net assets (after deducting hisliabilities) is below the Nisab limit

7. Fi Sabeelillah: Those who are away fromhome in the path of Allah

8. Ibnus-Sabeel: A traveler, who, whilst wealthyat his residence, is stranded and in need ofnancial assistance

Which Relatives Canand Can Not Receive Zakat?

Zakat can be given to one’s brother, sister,nephew, niece, paternal or maternal uncle,paternal or maternal aunt, father-in-law, mother-in-law, step-grandfather, or step-grandmotherprovided they do not have Nisab. According tosome narrations, relatives and neighbors havemore rights on you to receive your Zakat.

Zakat can not be given to one’s parents, grandparents,children, grandchildren, wife, husband, or familydescendants of the Prophet Muhammad (pbuh).Zakat is only given by Muslims to Muslims.

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Documents

Practical Guide for Calculating Zakat