Zakat is an obligatory contribution used to reduce the hardships faced by communities and families living in poverty. Our Zakat donation guide will answer all your questions on the basics of Zakat including who is eligible to pay it, who is eligible to receive it and when you are expected to pay Zakat each year. For any further questions, you should seek advice from your local imam or scholar.
What is Zakat?
Zakat is one of the Five Pillars of Islam in addition to faith (Shahada), prayer (Salat), fasting (Sawm) and pilgrimage (Hajj). The Five Pillars are considered the fundamental beliefs and practices of the Islamic Faith and should influence a Muslim’s everyday obligations. A Muslim who lives their life according to the Five Pillars is considered as living the best life possible, responsible to their faith and good to their community.
Zakat, or charity, is the purification of held wealth; a donation which is made once a year when certain individual circumstances are met and held for the minimum term. Your Zakat donation is distributed by Orphans in Need to those in need, including impoverished children living in famine, families living in conflict and anyone less fortunate.
Who is Eligible for Zakat?
There are two groups of eligibility for Zakat, those who are eligible to pay Zakat and those who are eligible to receive Zakat. The rules for eligibility are quoted in the Qu’ran and define those who are qualified to pay Zakat as:
– Of Muslim faith
– Of sound mind
– Unbound or free
– Above the age of puberty
– Holding positive goods or cash flow
– Holding wealth greater than the Nisab threshold
Summarised, an individual is eligible to pay Zakat if they are an adult of Muslim faith, in good health and earning more than the Nisab threshold which designates the minimum value to fulfil their day-to-day needs.
There are specific groups of people who are eligible to receive Zakat donations and they are defined as:
– The poor (Fakir)
– The hungry (Miskin)
– Distributors of Zakat (Amil)
– Those in captivity or slavery (Riqab)
– Those living in unmanageable debt (Gharmin)
– Fighters in the name of Allah (SWT) (Fisabilillah)
– The stranded or struggling travellers (Ibnus Sabil)
– New Muslims and friends of the Muslim communities (Muallaf)
Orphans in Need will distribute your Zakat donations to the communities which need it most, please donate your Zakat here.
What is Nisab?
The Nisab threshold is the amount of wealth that should be held for a minimum term known as ‘Hawl’. Hawl is the term used to describe a lunar year, which is the Islamic year lasting 354 days. The Nisab amount needs to be met and held for an entire Hawl (Islamic year) before you are eligible to pay Zakat.
The Nisab amount is not fixed on a monetary figure but is instead calculated based on a fixed weight of silver and gold. You can choose to calculate your Zakat on either gold or silver, but the wealth amount must exceed the Nisab minimum to be eligible to pay Zakat. Zakat is calculated on a Nisab threshold amount of 612.36 grams of silver or 87.48 grams of gold.
The silver value is often the lowest Nisab threshold amount and the most commonly used value to calculate Zakat, as it allows for a greater distribution of wealth to be used to help people and communities in need.
When is Zakat Due?
Zakat is only due when your wealth which exceeds the Nisab threshold has been held for a full Hawl (Islamic year). If your held assets or wealth fall below the Nisab threshold, traditionally, the Hawl period begins once your wealth again exceeds the Nisab limit, however, this differs between certain groups.
Zakat is calculated on the personal wealth amount held once the end of the Islamic year has been reached, although many communities choose to pay their Zakat during Ramadan when the anticipated rewards are greater.
Your held wealth and assets can fluctuate during the Hawl but should not fall below the Nisab threshold. It does not matter by how much your wealth increases or decreases during the year, the Zakat is calculated on the held wealth at the end of the Islamic year.
Some communities consider held wealth at the beginning and the end of the Hawl as the only definitive value, so, talk to your local scholar for information on paying your Zakat if your held wealth fell below the Nisab value temporarily this year.
How Much is Zakat?
Zakat is calculated as 2.5% of your held wealth and is determined on assets including:
– Cash held in bank accounts or at home
– Savings for an intended purpose (car, wedding, Hajj)
– Held gold and silver
– Held stocks and shares
– Outstanding money owed
– Stocks held as part of a business
– Saved rental income from property
In summary, Zakat is calculated on anything considered a liquid asset (can be readily converted in cash) minus your short-term liabilities such as:
– Bills for the month Zakat is due
– Personal loans or any money owed to others
– Rent/Mortgage for the month Zakat is due
– Credit card debt
For business owners, this may also include
– Any expenditures including salaries, bills, rates and rent
– Short-term business loans or overdraft amounts
You should not include the value of your necessities such as the home or land that you are primarily using to live as part of the liabilities or assets. Personal items including a car, clothing, appliances or anything required to live should also not be considered as part of your assets. Although, any second home or car should be used to calculate Zakat as these are considered above the basic lifestyle necessities.
There are different Zakat rates for farmers and those with precious resources on their land including:
– 5% on a farmer’s assets where irrigation is funded by the farmer
– 10% on a farmer’s assets where irrigation is handled naturally (by the rain)
– 20% on the amount of precious resource acquired from your property during the year including gold, silver and oil
To take the difficulty out of calculating your Zakat, Orphans in Need have provided an easy to use Zakat Calculator, follow the link below to work out your owed Zakat for 2020.
Common Zakat FAQs
There are many queries regarding Zakat donations and while we have tried to gather the relevant information, some madhabs (Islamic schools of thought) designate different rules and you should speak to your local imam or scholar.
Can I Pay My Zakat in Instalments?
It is acceptable to pay Zakat in instalments, however, Orphans in Need accept Zakat as a single transaction.
Do I Pay Zakat on my Children’s Wealth?
There are two schools of thought, one designates that only Muslims who have gone through puberty are expected to pay Zakat, however, some communities do expect Zakat when a children’s wealth exceeds the Nisab threshold. You should speak to your local scholar to confirm.
Can I Pay Zakat as a Couple?
Zakat is a personal obligation and must be calculated on individual wealth, however, with your spouse’s permission, your combined Zakat can be paid in a single transaction.
I Have Not Held My Wealth for a Full Hawl, Do I Pay Zakat?
The rules of Zakat state that you must pay Zakat when your held wealth exceeds the Nisab threshold at the start and end of the Zakat year. You can pay Zakat in advance but must take into consideration any responsibilities or liabilities that could affect your quality of life.
During the Zakat Year My Wealth Fell Below the Nisab Threshold, Do I Still Pay Zakat?
Officially, your wealth should remain above the threshold limit for Zakat to be due, however, there are schools of thought that believe that your wealth should only be above the Nisab threshold at the beginning of the Zakat year (when your wealth first exceeded the Nisab threshold) and at the end of the Zakat year when payment is due.
I Have Received A Large Sum of Money Before My Zakat is Due, Do I Pay Zakat on This?
Yes, any held wealth in the Zakat year is Zakatable.
I Give Lots of Charity Throughout the Year, Do I Still Need to Pay Zakat?
Yes, your Zakat is still due as it is the intention of paying Zakat that makes it count.
I Haven’t Paid Zakat for Several Years, How Do I Pay What Is Owed?
You should calculate the amount of Zakat due at the end of each Zakat year to the best of your ability and make a payment that incorporates this year’s Zakat amount and any outstanding payment due.
How Are Those Eligible to Receive Zakat Defined?
Orphans in Need distributes your Zakat to the poor and needy. The poor are those who do not hold wealth greater than the Nisab threshold and the needy are defined as anyone living in extreme poverty that doesn’t have enough food to last a day.
Can Zakat Be Paid to a Family Member?
Zakat cannot be paid to any family member that is already dependent on you or if you are already obligated to take care of them, such as your children. Parents and children should never pay Zakat to each other, although, if another relative is poor or needy, they can be given your Zakat contribution.
Should I Use the Gold or Silver Nisab Threshold to Calculate My Zakat?
Different schools of thought suggest using one over the other and you should talk to your local scholar or imam to clarify. Using the silver Nisab threshold value will provide a greater Zakat donation which will allow us to help more individuals in need and living in poverty.
When Does the Zakat Year Begin?
The Zakat year does not have a fixed date and begins once your wealth has exceeded the Nisab threshold. The Zakat year is a full lunar year since reaching the minimum held wealth required to pay Zakat.
I Have Been Saving for Hajj, Do I Pay Zakat on This?
Yes, any savings for Hajj or other reasons should be included in your Zakat calculation.
Do I Calculate Zakat on my Pension Fund?
Zakat is only paid on held wealth. If you are currently paying into your pension fund but this is not held in a personal bank account that you have free access to, then it is not required to calculate Zakat.
What is Zakat ul-Fitr (Fitrana)?
Fitrana, also known as Zakat ul-Fitr, is the contribution made on the festival of Eid ul-Fitr before making Eid prayers. Fitrana contributions equate to one saa’ of food per person, which is four times the amount of staple food (flour or rice) that can be held in two cupped hands (measured as one maad). Fitrana is normally given as a food donation however for convenience, Orphans in Need will use your monetary donation and distribute food to eligible individuals in need for you.
How to Donate Zakat?
Orphans in Need are an official Zakat charity and will give Zakat donations to those in need on your behalf. Visit our Zakat calculator to work out how much you need to donate and pay your Zakat online with us.