» Zakah calculation

Question

Can you please help me calculate Zakat?I want to pay the appropriate amount. I am not trying to be cheap, but I have read wildly varying methods of calculation that could impact my payment by several thousand US dollars each year. I suppose I am asking for a full overview of zakat calculation, but I will provide a few questions that have been particularly confusing for me:

I have been told that only money earned in the past year iszakatable. This is similar to the way we pay our annual income tax in the US. I have also been told that money held for less than 1 year is exempt from Zakat. Furthermore, I have heard that only increases in your net worth are zakatable, so a rich person may still not have to pay if he is living off of his wealth and no longer earning.I’ll illustrate these scenarios:
- I have no money at the start of the year 1430. By the beginning of1431 I have saved $100. During the year 1431, I make 101, but I spend all of it, so my net worth is still $100 at the beginning of 1432. In 1432, I don’t work, and I spend $10 of my savings, so that at the beginning of 1433, I net worth is $90. By the beginning of 1434, though hard work, I have a net worth of $200.
- Clearly I owe no zakat in 1430. However, at the beginning of 1431, do I pay Zakat on $100 (since that is my net worth), or 0 (since I have not yet held that money for a full year?) At the beginning of 1432, do I pay on $100, 101, or 201? In 1432, I finished the year with less money than I started. Therefore, do I pay 0 zakat, or do I pay on the $90 that are remaining? Or do I pay Zakat on $100, since that is what I had at the start of 1431?
Are possessions zakatable? For example, let’s say that I own a nice car, but have little savings. Am I required to sell the car, or find another source of income, to pay zakat on it? In my personal case, I own a share of the home that my mother lives in. When she sells the home, I will get a sizable share of the selling price. Am I required to pay zakat on my share of my mother’s home?
Is money that I am owed zakatable? For example, I had to pay a deposit of $600 when I rented my apartment. This deposit should inshAllah be returned when I move out of the apartment, provided themanagement company does not find any damage. A popular Islamic charity states that I am required to pay zakat on this $600, even though I haven’t had access to it in some time.
Nisaab: Is Nisaab ul-Zakat (based on the current price of silver and gold) an exclusion from Zakat, or a dividing line between who pays Zakat and who does not? For example: If nisaab is $100 at the current market price for gold, I understand that I don’t pay zakat if my net worth is only $99. However, if my net worth is $101 dollars, is my zakat $2.53 (2.5% of $101) or $0.03 (2.5% of the difference between my theoretical net worth and nisaab)?
Can I pay Zakat to a non-Muslim charity that may or may not use the money to help Muslims? For example, if I make a donation for Somali drought relief, and that money feeds both Muslim and non-Muslim Somalis, is this ok?

My sincerest thanks for your help.

Answer

Let me first remind us of the items (other than livestock) on which Zakah is applicable, these are:

Wealth (money or asset that is not in personal or business use): 2.5% annually. The most practical way to pay this amount is to fix a date in a year, every year in that date the total wealth is figured out and 2.5% of it will be paid as Zakah (this does not include the money that you are using on a daily basis to meet your expenses, e.g. the part of the salary that, as your routine, will be spent for living rather than saving. Technically this is not wealth).
Produce that can be 5% (for those items which are produced by the interaction ofboth labour and capital), 10 % (for those items which are produced such that the basicfactor in producing them is either labour or capital) or 20% (for those items whichare produced neither as a result of capital nor labour). In principle the zakah of production need to be paid when it occurs.

I now try to apply the above rules to your circumstances:

I have no money at the start of the year 1430. By the beginning of1431 I have saved $100. During the year 1431, I make 101, but I spend all of it, so my net worth is still $100 at the beginning of 1432. In 1432, I don’t work, and I spend $10 of my savings, so that at the beginning of 1433, I net worth is $90. By the beginning of 1434, though hard work, I have a net worth of $200.Clearly I owe no zakat in 1430. However, at the beginning of 1431, do I pay Zakat on $100 (since that is my net worth), or 0 (since I have not yet held that money for a full year?) At the beginning of 1432, do I pay on $100, 101, or 201? In 1432, I finished the year with less money than I started. Therefore, do I pay 0 zakat, or do I pay on the $90 that are remaining? Or do I pay Zakat on $100, since that is what I had at the start of 1431?

As explained above, it will be easier if you consider a date in a year as your annual zakah date for your wealth. Since you are frequently referring to the beginning of the Islamic year as the basis of how much money you had, I suggest you consider that (start of the year) as the base of the zakah of your wealth.

Accordingly, the answer to your questions will be as follows:

at the beginning of 1431, do I pay Zakat on $100?

Yes.

At the beginning of 1432, do I pay on $100, 101, or 201?

Pay on the money that is in your possession at the start of 1432. Based on what you wrote this seems to be $100 minus the zakat that you had to pay at the start of 1431.

In 1432, I finished the year with less money than I started. Therefore, do I pay 0 zakat, or do I pay on the $90 that are remaining? Or do I pay Zakat on $100, since that is what I had at the start of 1431?

Again, you pay on what is in your possession at the start of the year 1433, that is (according to the information you provided) $90 minus the zakat of the previous years.

The same applies to the zakah that is due at the start uf 1434.

A few points before proceeding to your next question:

I presume you have given the above dates only as examples. Obviously years 1433 and 1434 are not arrived yet and we cannot calculate zakah for future.
Again I presume you gave the above amounts as examples, otherwise you probably know that the Nisaab for wealth is 642 grams of silver and that is significatly more than $100. If the amounts you gave above are for real and they are the only wealth that you have then you do not need to pay Zakah on them because they are less than Nisab. Please note, as stated earlier, by ‘wealth’ I mean any valuable item (cash or assets) that is not in your personal or business use.
The way you have given the above examples, I understand that you are referring to wealth. If you have money earned by producing using labour and/or capital, then that is also due for Zakah, as explained above.
If you are paying tax to the government than that tax is in fact part of the Zakah that you are paying. You therefore need to compare that amount of tax with the total amount of Zakah that you need to pay. If they are equal or if your tax is more than the amount of Zakah that you calculated then you do not need to pay anything as Zakah. If the tax is less than the amount of Zalah then you only need to pay the difference as the remaining of your Zakah.

2. Are possessions zakatable? For example, let’s say that I own a nice car, but have little savings. Am I required to sell the car, or find another source of income, to pay zakat on it? In my personal case, I own a share of the home that my mother lives in. When she sells the home, I will get a sizable share of the selling price. Am I required to pay zakat on my share of my mother’s home?

As stated earlier, possessions are due for Zakah only when they are not in your personal or business use. If you are using a car then no Zakah is due on it, otherwise you need to pay Zakah on it. In the latter case you do not need to sell it but it will remain your religious debt that you will need to pay either by installments or as soon as you can.

The same applies to the share of the home when you sell it. If you hold the money without working with it (e.g. investments) then you need to pay 2.5% Zakah on it.

3. Is money that I am owed zakatable? For example, I had to pay a deposit of $600 when I rented my apartment. This deposit should inshAllah be returned when I move out of the apartment, provided the management company does not find any damage. A popular Islamic charity states that I am required to pay zakat on this $600, even though I haven’t had access to it in some time.

No in my view you do not need to pay Zakah on it, simply because it is not in your possession.

4. Nisaab: Is Nisaab ul-Zakat (based on the current price of silver and gold) an exclusion from Zakat, or a dividing line between who pays Zakat and who does not? For example: If nisaab is $100 at the current market price for gold, I understand that I don’t pay zakat if my net worth is only $99. However, if my net worth is $101 dollars, is my zakat $2.53 (2.5% of $101) or $0.03 (2.5% of the difference between my theoretical net worth and nisaab)?

This is a matter of Ijtihaad. According to Moiz Amjad it is to be excluded from Zakah.

5. Can I pay Zakat to a non-Muslim charity that may or may not use the money to help Muslims? For example, if I make a donation for Somali drought relief, and that money feeds both Muslim and non-Muslim Somalis, is this ok?

Zakah can be used for the purposes that the Qur’an (9:60) has specified. Being Muslim or not is not the condition, so yes you can spend it for the purpose you stated.

UIUK team