By Islamic law, Muslims who have wealth over a certain amount are required to make a Zakat payment each year. By doing so, wealth is transferred from the rich to the poor, thereby preserving societal balance. Zakat can be given to poor and needy people or organizations that can later distribute it to those in need. Before sending your Zakat, do a thorough search about the organization’s legitimacy.
Nowadays, calculating how much Zakat one owes can be pretty challenging. Please refer to the following guide if you need assistance calculating Zakat in 2024.
Exactly What is Zakat?
What does Zakat mean? Muslims donate Zakat as a charitable donation to Allah out of their surplus wealth, calculated as 2.5%. Simply put, Zakat comprises 2.5% of your savings and financial assets that do not go toward living expenses.
The calculation excludes income used to pay bills, house payments, and necessities (We will discuss those later). When figuring out how to calculate Zakat – or if you qualify to pay – there are other factors to consider.
What Does Nisab Entail?
A specified amount of wealth known as ‘Nisab’ determines whether you are required to pay Zakat. You must pay Zakat if you own more than Nisab for that calendar year. You do not need to pay Zakat if it is less than that amount.
Two values define the minimum wealth threshold in Islamic Law (Nisab): three ounces of gold or 21 ounces of silver. Currently, gold and silver are not used as currency so that we can calculate their cash value online.
According to the gold standard, Nisab is the equivalent of three ounces of gold (87.48 grams) or its cash equivalent. The value of gold can be calculated online by multiplying the number of grams by its market value at the time of calculation.
Silver Nisab consists of 21 ounces (612.36 grams) of silver in cash or its equivalent. Silver’s current market value can be calculated online by multiplying the grams by the number of grams. Trying to decide which Nisab threshold to use, gold or silver? For the Hanafi school of thought, determining Nisab thresholds and Zakat eligibility is based on the silver standard.
Nevertheless, The Hanafi school has modern scholars who advocate using the gold standard, especially in today’s economic climate when the cost of living is high and silver has decreased in value. Other schools of thought use the value of gold. If you wish to increase the amount of charity distributed, use the silver standard.
What is The Process for Calculating Zakat?
The calculation of Zakat is, in most cases, relatively straightforward, as tax calculations are. Following is a basic formula:
1. Add Up All Your Income Sources
Look at all the assets you have owned during the past year. Included in this are:
Cash + Silver & Gold + Your Debts* + Real Estate Investments* + Stocks & Bonds + Savings and Investment Funds + Assets of Your Business = Your Net Income.
Some categories above with an asterisk (*) require special consideration and instruction. Do consult a religious scholar for more information on it.
2. Add up your Living Expenses and Emergency Expenses
The following are included:
The sum of your living expenses + the amount of debt you have* + the amount of business expenses you incur* = the living expenses of your household
Like previously, those highlighted with an asterisk mark have special considerations you can discuss with a religious scholar.
3. Assess The Amount of Your Wealth That is Zakatable
The Total Income You Earn – Expenses for Living = The Zakatable Wealth You Have
4. Make Sure Your Zakatable Wealth Exceeds Nisab’s Threshold
The current cash value of your Nisab threshold should be determined before choosing gold or silver. In cases where you have Zakatable Wealth exceeding the Nisab threshold, you can proceed to the next step!
5. Calculate How Much Zakat You Have to Pay:
To determine your total zakat for the year, multiply your Zakatable wealth by 2.5%. I.e., Total Zakatable Wealth You Have x 2.5%
Here are the fundamentals of Zakat calculation, which will help you understand. To simplify the calculation, you may use Muslim and Quran Zakat Calculator, which allows you to plug in your numbers. You can even have your gold and silver valued automatically by this program.
What If You Want to Calculate a Part of It?
Every individual’s circumstances vary, so we understand that people want to exercise extra care when calculating Zakat. Our strength lies in our ability to be multi-faceted, so it becomes even more complicated (or comprehensive) when we consider the views of different scholarly authorities.
Excludable Assets for Zakat Calculations
Zakat calculations are exempt from the following liabilities according to different ulema:
- The salary you owe your employees
- Rent owing to your landlord that has not been paid
- Whether you have outstanding personal loans or mortgages
- Credit card and utility bills that are pending
- Rent on property: The value of the rental property that has been given by the landlord to the tenant
What is the Use of Your Zakat?
The concept of Zakat extends far beyond a yearly obligation. It is a revolutionary concept that could ease millions of people’s suffering around the globe. The Quran refers to it over 30 times, often with the institution of prayer.
According to the Quran 5:55, Allah ((سُبْحَانَهُ وَتَعَالَ) defines true believers as “those who remain steadfast in prayer and give Zakat.” In this sense, we are set apart from other people as people who strive to refine themselves inside and serve others through Zakat.
Then, how does your Zakat make a difference in people’s lives? Zakat is intended to assist the vulnerable, the less fortunate, and the poor. The goal is to ensure that our collective wealth is distributed to those most need it.
What Are the Beneficiaries of Zakat?
Zakat recipients are “masarif-e-Zakat” or “Zakat recipients.” Masarif-e-Zakat remains the same regardless of whether it is considered Zakat of Dignity or Sharia. In the Quran, Allah (سُبْحَانَهُ وَتَعَالَى) Almighty categorizes Masarif-e-Zakat as follows:
“The prescribed alms are meant only for the poor, the needy, those employed to administer the funds, those whose hearts are reconciled to the faith, for freeing slaves and helping those in debt, for God’s cause, and for travellers in need. This is an obligation from Allah. And Allah is Knowing and Wise.” (Quran 9:60)
There are eight categories of individuals who may benefit from the Zakat collected. Today, and considering the world’s situation, Zakat is primarily given to these first two categories since their needs are the most basic and urgent.
Identifying those well below Nisab, we work with the most vulnerable and the poorest of the poor. Households headed by orphans, single women, orphans with disabilities, and the elderly are included in this category.
Zakat is a compulsory and essential pillar of Islam and is mandatory for every Muslim to pay if they can afford it. It’s 2.5% of your total savings and can be given to those who are poor and needy or to organizations that work for the welfare of these people.
We hope you understand Zakat and how to calculate your due after reading the above guide. If you still have any confusion, contact a religious scholar or a Cleric.
Rafia Tahir is a Quran scholar and an Islamic blogger, dedicated to sharing the message of Islam. Her engaging personality and deep knowledge make her a cherished voice in the Islamic community and beyond. She occasionally writes articles for Muslim And Quran.