Zakat is the amount of money that every adult, mentally stable, free, and financially able Muslim, male and female, has to pay to support specific categories of people. To learn more, scroll down to Zakat 101 below.
Mufti Faraz Adam is a globally recognized expert in Islamic Finance, Islamic Social Finance & Islamic FinTech. He is advising several global Islamic financial institutions spread across the UK, US, Canada, Malaysia, Singapore, UAE and other countries. He recently authored a book on Islamic Fintech called ‘Introduction to Islamic Fintech’, and has written several research papers on Islamic Finance and complex products.
The basics of Zakat. When, how, and who is eligible for zakat al-maal.
Zakat is obligatory after a time span of one lunar year passes from when a person initially owns wealth that equals the Nisab (threshold). Then, the owner needs to pay 2.5% (or 1/40) on the money in their possession at the end of the lunar year. A lunar year is approximately 355 days.
The owner should deduct any amount of money he or she borrowed from others; then check if the rest reaches the necessary Nisab then pay Zakat for it. If the owner had enough money to satisfy the Nisab at the beginning of the year, then the money increased (in profits, salaries, inheritance, grants, etc.), the owner needs to add the increase to the Nisab amount that they owned at the beginning of the year as long as they are still in ownership of it at the end of the year. Then, the owner pays Zakat (2.5%) of the total at the end of the lunar year. There are small differences in the Fiqh schools here - it is best to work out the details with your Local Mufti or Imam.
Each Muslim calculates his or her own Zakat individually. For most purposes this involves the payment each year of two and a half percent of one’s capital.
A pious person may also give as much as he or she pleases as Sadaqa, and does so preferably in secret. Although this word can be translated as ‘voluntary charity’ it has a wider meaning. The Prophet (SAW) said, ‘Even meeting your brother with a cheerful face is charity.’
Fakir: One who has neither material possessions nor means of livelihood.
Miskin: One with insufficient means of livelihood to meet basic needs.
Gharmin: One who is in debt (money borrowed to meet basic, Halal expenditure).
Ibn Sabil: One who is stranded.
