Calculate Zakah: Zakat, one of the Five Pillars of Islam, is a form of almsgiving and a religious obligation for all Muslims who meet the necessary criteria of wealth.
Zakah serves as a financial worship that purifies those who receive it and enables wealth to circulate more justly within the community. However, calculating Zakat can be a complex process, involving various types of assets and specific conditions that must be met.
This guide aims to simplify that process, providing you with a step-by-step methodology for calculating Zakat on general assets as well as on salary. Whether you’re a business owner with diverse investments or an individual looking to calculate Zakat on your annual income, this guide has you covered.
Read on to find out how you can fulfill this important religious obligation with accuracy and peace of mind.
How To Calculate Zakah
The calculation of Zakat depends on the type and value of assets a person possesses. To know how much is Zakat?, Here’s a general guide on how to calculate Zakat:
1. Determine The Holdings That Are Subject To Zakat
Zakat is due on specific types of holdings. These include not just liquid assets like cash savings, but also physical assets like gold and silver, financial investments such as stocks and bonds, and even income generated from rental properties.
Some scholars also include agricultural produce and livestock in the list of Zakat-eligible assets.
2. Calculate The Actual Worth Of Each Holding
To get an accurate Zakat amount, you need to know the actual worth of each holding. This involves calculating the money you have saved in your bank accounts, the current market value of your gold and silver, and the worth of any other investments you might have.
For investments like stocks, it’s important to consider their current market value rather than the purchase price.
3. Subtract Any Outstanding Debts
Before you calculate Zakat, you can subtract any outstanding debts you may have. This includes not just long-term debts like mortgages, but also short-term obligations like credit card balances or personal loans.
Some scholars advise that only immediate debts should be deducted, not long-term debts that are not due immediately.
4. Determine The Nisab
Nisab is the minimum threshold that makes Zakat obligatory. It is approximately equal to the value of 85 grams of pure gold or 595 grams of silver.
The Nisab value can fluctuate based on current market rates for gold and silver, so it’s important to check these rates at the time of calculation.
5. Calculate The Zakat Rate
The standard Zakat rate is 2.5% of the total value of assets that are subject to Zakat.
In some cases, like agricultural produce, the Zakat rate may differ. It’s advisable to consult religious authorities for specific rates.
6. Calculate And Pay Zakat
Once you’ve gathered all this information, you can calculate your Zakat. Apply the 2.5% Zakat rate to the total value of your assets that exceed the Nisab. After calculating, you have the option to pay your Zakat to a reputable charity or distribute it directly to those in need.
Zakat can be distributed to eight categories of recipients as mentioned in the Quran, including the poor, the needy, and those employed to administer Zakat.
It is important to note that the above steps provide a general guide on how to calculate Zakat. But, there may be specific rules and regulations depending on the country, region, or sect of Islam.
It’s always best to consult with an eligible religious authority or expert in Zakat calculation to ensure accuracy and compliance.
How To CalculateSubtract Zakat On Salary
You can determine how much Zakat to pay on salary by calculating 2.5% of your yearly net revenue. Here is how to calculate Zakat on salary:
1. Calculate Your Net Revenue
The first step is to calculate your net revenue, which is your gross annual income minus any deductions like taxes, social security, and other mandatory contributions.
If you receive bonuses, commissions, or any other additional income during the year, these should also be included in your gross income before deductions.
2. Subtract Your Essential Expenses
Next, you’ll need to subtract your essential living expenses. These include rent or mortgage payments, utility bills, food, and medical expenses.
Essential expenses do not include luxury items or optional activities like vacations or dining out. Only the basic costs needed for day-to-day living should be deducted.
3. Calculate Your Zakat-able Assets
Now, add up the value of all your zakat-able assets. This includes not just your remaining salary after essential expenses but also any savings, investments, stocks, property, and jewelry that you have owned for a Hawl (one lunar year).
If you have assets in foreign currencies, they should be converted to your local currency at the current exchange rate for an accurate calculation.
4. Deduct Your Debts
Before calculating your Zakat, you can subtract any unsettled debts or financial obligations you may have. This could include student loans, car loans, or any other debts that are yet to be paid.
Similar to Zakat on other assets, only immediate or short-term debts that are due within the lunar year should be deducted, unless advised otherwise by a religious authority.
5. Calculate Your Zakat
Finally, once you’ve determined your zakat-able assets, you can calculate your Zakat. Multiply the total value of these assets by 2.5% (or 0.025) to arrive at the amount of Zakat you owe.
It’s advisable to consult with a religious scholar or a Zakat calculator tool to ensure you’re calculating correctly, especially if you have multiple types of assets and debts.