Zakat is an Arabic term that means purity. When we have money that remains with us for a year, we take 2.5% of that money and give it to the poor and needy. Allah says: (Successful indeed are the believers * Who are humble in their prayers * And who turn away from ill speech * And who are observant of Zakat) [Surah Al-Mu`minun 1:4]. And He says: (The believing men and believing women are allies of one another. They enjoin what is right and forbid what is wrong and establish prayer and give Zakat and obey Allah and His Messenger. Those - Allah will have mercy upon them. Indeed, Allah is Exalted in Might and Wise) [Surah At-Tawbah 71].
Zakat is given to eight categories of people mentioned in the Quran: (Zakat expenditures are only for the poor and for the needy and for those employed to collect Zakat and for bringing hearts together and for freeing captives and for those in debt and for the cause of Allah and for the traveler - an obligation imposed by Allah. And Allah is Knowing and Wise) [Surah At-Tawbah 60].
A- Gold and silver not used for women`s adornment
B- Saved money in any currency
C- Stocks and bonds
D- Assets and properties used for investment
E- Assets and properties rented out
F- Crops and livestock.
A) Full ownership: The owner must have complete control over the wealth without any claims from others. Allah says: (Take from their wealth a charity to purify them and sanctify them with it) [Surah At-Tawbah 103]. Lost wealth, usurped wealth, doubtful debts, and wealth whose location is unknown are not subject to Zakat unless found.
B) Growth potential: The wealth must have the potential to grow through trade, agriculture, or other means.
C) Reaching the Nisab: The Nisab for gold is 20 Mithqal (85 grams of pure 24-karat gold), and for silver, it is 200 Dirhams (595 grams of pure silver). For crops and fruits, the Nisab is five Awsuq (approximately 653 kg). For camels, it is five; for cows, thirty; and for sheep, forty.
D) The passage of a lunar year: A full lunar year must pass on the wealth that has reached the Nisab, as the Prophet (peace be upon him) said: "There is no Zakat on wealth until a year has passed." Exceptions include Zakat on crops, which is due upon harvest.
E) Surplus beyond basic needs: The wealth must exceed the owner`s basic needs, as Zakat is not obligatory on wealth needed for essential living expenses.
Nisab is an Arabic term that means the minimum amount of wealth one must possess for Zakat to be obligatory. If one does not possess this amount, Zakat is not obligatory. The Nisab is 85 grams of gold or its equivalent in cash.
Hawl refers to a lunar year (354 days), and Zakat must be paid after a full Hawl has passed since the wealth reached the Nisab.
The majority opinion is that items used for personal use, such as the house you live in, the car you drive, and the jewelry women wear, are not subject to Zakat. However, if the gold is used for saving or investment, or if that is the primary intention behind owning it, then Zakat is obligatory without dispute.
* As a general rule, you cannot pay Zakat to anyone you are financially responsible for.
* For a man, this includes his wife, children, and parents. Therefore, a man cannot pay Zakat to his wife because he is already obligated to provide for her.
* However, a woman is not financially responsible for her husband, so she can pay Zakat to him if he is in need and falls under one of the eight categories mentioned earlier.
* In general, both men and women can pay Zakat to their siblings, cousins, uncles, and aunts if they are eligible.
If you know that your profits and savings will remain the same next year, you can pay Zakat in advance for that year. However, if your profits and savings change, and you owe more, you will need to pay the difference.
It is also permissible to pay Zakat in installments, although it is preferable to pay it all at once.
Your wealth or net assets can be calculated as the liquid assets you own, minus your short-term liabilities.
Liquid assets are those that can be easily converted into cash. Short-term liabilities include bills, rent, personal loans, and credit card debts. Most scholars agree that any mortgage due to the bank should not be included in this calculation.
Here is what you should include in your assets:
1- Cash in the bank and at home
2- Savings for specific purposes, such as weddings, Hajj, buying a car, etc.
3- The value of gold and silver you own, not used for adornment
4- The market value of stocks
5- Money owed to you (such as debts from others) that is likely to be repaid
6- If you own a business, the balance sheet value of the shares you own.
7- If you own real estate, any rental income you have saved during the Zakat year.
* You do not need to include the value of your home or land as part of your Zakatable assets. You also do not need to include personal belongings such as cars, clothes, or household appliances as part of your assets.
* If you own real estate for investment (for purchase/rental), any income you save from rent will be part of your Zakatable assets, but the value of your real estate investment portfolio is not included in your Zakat calculation.
Here is what you should include in your liabilities and expenses:
1- Debts you owe to others, such as personal loans (from banks or friends), credit card debts, etc.
2- Rent/bank loan installment for the current month or arrears
3- Bills due
4- If you own a business, you can include its expenses such as rent, utilities, salaries, bills, etc.
5- You can also include short-term business loans and overdrafts in your liabilities.
Thus, your wealth/net assets are calculated as follows:
Assets - Short-term liabilities = Your wealth
If your wealth is above the Nisab on the day of calculation, you are obligated to pay Zakat.
Zakat is 2.5% of your total Zakatable wealth. For example, if you have $10,000 of Zakatable wealth, your Zakat would be $250.
* If you own stocks for trading purposes, you must include their value in your wealth when calculating Zakat.
* If the stocks you own are not for trading but are held as investments to earn dividends, only the dividends you earn should be included in your assets.
* The same rule applies to real estate trading. If you buy property with the intention of reselling it, you must include its value in your assets.
* However, if the property is purchased as an investment (for example, to rent it out) and the only benefit is rental income, only the profit from the investment should be included in your assets.
Long-term real estate loans are not considered liabilities in your Zakat calculation. However, personal loans can be deducted as liabilities when calculating Zakat.
Yes, you should include that amount in your total wealth when calculating Zakat.
Zakat must be paid with the intention of fulfilling the obligation of Zakat. If a person gives any other charity, it cannot be counted as Zakat unless the intention was to pay Zakat.
In such a case, you are still obligated to pay Zakat.
For each year you missed paying Zakat, calculate 2.5% of your total wealth at the end of that year and pay it as Zakat. If you are unsure of the amount of wealth you had, you should estimate it as best as you can.
When the Zakat due date arrives each year, you should calculate the total selling price of all the goods available for sale in your store. For example, if the total price of all the clothes available for sale in your store amounts to $50,000 (and this amount is more than the equivalent of 85 grams of gold, i.e., it exceeds the Nisab), Zakat should be paid on this value if the clothing store is your only asset, or this amount should be added to your other wealth/assets when calculating your Zakat.
For the four years you were renting the house and did not intend to sell it, you do not pay Zakat on the house. However, you must still pay Zakat on the rental income you earned, just like any other wealth you have. Additionally, you must pay Zakat after one lunar year from the day you decide to sell the house. Zakat is due on the selling price of the house. If you are paying in advance, you will need to estimate this amount. You will need to do the same for each subsequent year if the house remains unsold.
Yes, because a debt that is expected to be repaid is treated as owned wealth.
We need to consider the intention when the money was lent. If the lender believed that he would not get the money back and could not claim it through the judicial system, then Zakat is not due for those years. However, once the money is repaid, it becomes part of the Zakat calculation for the year it was received.
Yes, they should be included and are subject to Zakat if they reach the Nisab.
The best way to do this is to take the jewelry to a jewelry store and ask them to appraise it. The appraisal they provide will be the total amount, and you can then calculate the Zakat on it.
Zakat al-Fitr is a prescribed charity given by every Muslim before the Eid al-Fitr prayer. It is obligatory according to the hadith of Ibn Umar (may Allah be pleased with him) who said: (The Messenger of Allah (peace be upon him) ordained Zakat al-Fitr as one Sa` of dates or one Sa` of barley for every Muslim, whether free or slave, male or female, young or old, and he commanded that it be given before people go out to the prayer).
Yes, it is permissible according to the Hanafi and Shafi`i schools of thought.