Zakat is an obligatory contribution used to reduce the hardships faced by communities and families living in poverty. Our Zakat donation guide will answer all your questions on the basics of Zakat including who is eligible to pay it, who is eligible to receive it and when you are expected to pay Zakat each year. For any further questions, you should seek advice from your local imam or scholar.
What is Zakat?
Zakat is one of the Five Pillars of Islam in addition to faith (Shahada), prayer (Salat), fasting (Sawm) and pilgrimage (Hajj). The Five Pillars are considered the fundamental beliefs and practices of the Islamic Faith and should influence a Muslim’s everyday obligations. A Muslim who lives their life according to the Five Pillars is considered to be living the best life possible, responsible to their faith and good to their community.
Zakat, or charity, is defined as the purification of held wealth. Zakat is a donation which is made once a year when certain conditions are met and held for a full Islamic year. Your Zakat donation is distributed by Orphans in Need to those who are most vulnerable, including impoverished children living in famine, families living in conflict and anyone less fortunate.
Who is Eligible to Pay Zakat?
There is a range of rules associated with paying Zakat, particularly related to who is obligated to make a Zakat payment each year. The majority of these rules are outlined in the Holy Quran, which defines those who are qualified to pay Zakat as:
– Of Muslim faith
– Of sound mind
– Unbound or free
– Above the age of puberty
– Holding positive goods or cash flow
– Holding wealth greater than the Nisab threshold
To summarise, an individual is eligible to pay Zakat if they are an adult of Muslim faith, in good health and earning more than the Nisab threshold which designates the minimum value to fulfil their day-to-day needs.
These rules are in place to ensure that only those who are capable of comfortably paying Zakat are obliged to.
Who is Eligible to Receive Zakat?
Alongside the rules surrounding who is eligible to pay Zakat, there are also guidelines on who should receiver Zakat and benefit from the generosity of the Ummah. There are several groups of people who are eligible to receive Zakat donations including:
– The poor (Fakir)
– The hungry (Miskin)
– Distributors of Zakat (Amil)
– Those in captivity or slavery (Riqab)
– Those living in unmanageable debt (Gharmin)
– Fighters in the name of Allah (SWT) (Fisabilillah)
– The stranded or struggling travellers (Ibnus Sabil)
– New Muslims and friends of the Muslim communities (Muallaf)
At Orphans in Need, we will distribute your Zakat donations to the communities which need it most including vulnerable orphans who rely on external support to live safe, happy childhoods.
What is Nisab?
The Nisab threshold is the amount of wealth that should be held for an individual to be eligible to pay Zakat. This wealth must be held for a specific period of time known as ‘Hawl’. Hawl is the term used to describe a lunar year, which is the Islamic year lasting 354 days. The Nisab amount needs to be met and held for an entire Hawl (Islamic year) before you are eligible to make a Zakat payment.
The Nisab amount is not fixed on a monetary figure but is instead calculated based on a fixed weight of silver – 612.36 grams – and gold – 87.48 grams. There are varying opinions surrounding which Nisab threshold amount should be used, though you can choose to calculate your Zakat on either gold or silver. The most important factor to remember is that your wealth must exceed the Nisab minimum for you to be eligible for paying Zakat.
The silver value is often the lowest Nisab threshold amount and the most commonly used value to calculate Zakat, as it allows for a greater distribution of wealth and in turn, provides support for more people in need.
When is Zakat Due?
Zakat is only due when your wealth, which exceeds the Nisab threshold, has been held for a full Hawl (Islamic year). If your held assets or wealth fall below the Nisab threshold, traditionally, the Hawl period begins again once your wealth exceeds the Nisab limit, however, this differs between groups.
Zakat is calculated on the personal wealth amount held once the end of the Islamic year has been reached, although many communities choose to pay their Zakat during Ramadan when the anticipated rewards are greater.
Your held wealth and assets can fluctuate during the Hawl but should not fall below the Nisab threshold. It does not matter how much your wealth increases or decreases during the year, the Zakat is calculated on the held wealth at the end of the Islamic year. This is to maintain financial security and ensure that no-one is forced to pay Zakat on money which they no longer have and in turn, put their financial stability at risk.
Some communities consider held wealth at the beginning and the end of the Hawl as the only definitive value, so, talk to your local scholar for further information on paying your Zakat if your held wealth fell below the Nisab value temporarily this year.
How Much is Zakat?
Zakat is not a fixed payment. Instead, Zakat is calculated as 2.5% of your held wealth and is determined on a range of assets including:
– Cash held in bank accounts or at home
– Savings for an intended purpose (car, wedding, Hajj)
– Held gold and silver
– Held stocks and shares
– Outstanding money owed
– Stocks held as part of a business
– Saved rental income from property
To summarise, Zakat is calculated on anything considered a liquid asset (can be readily converted in cash) minus your short-term liabilities such as:
– Bills for the month Zakat is due
– Personal loans or any money owed to others
– Rent/Mortgage for the month Zakat is due
– Credit card debt
For business owners, this may also include:
– Any expenditures including salaries, bills, rates and rent
– Short-term business loans or overdraft amounts
You should not include the value of your necessities such as the home or land that you are using to live as part of the liabilities or assets. Personal items including a car, clothing, appliances or anything required to live should also not be considered as part of your assets. Although, any second home or car should be used to calculate Zakat as these are considered above the basic lifestyle necessities.
There are different Zakat rates for farmers and those with precious resources on their land including:
– 5% on a farmer’s assets where irrigation is funded by the farmer
– 10% on a farmer’s assets where irrigation is handled naturally (by the rain)
– 20% on the amount of precious resource acquired from your property during the year including gold, silver and oil
To take the difficulty out of calculating your Zakat, Orphans in Need have provided an easy to use Zakat Calculator, follow the link below to work out your owed Zakat for this lunar year.
Common Zakat FAQs
The many rules and guidelines surrounding Zakat can be confusing. Often, we receive queries surrounding these areas of uncertainty surrounding Zakat donations and while we have tried to gather the relevant information, some madhabs (Islamic schools of thought) designate different rules. With this in mind, you should speak to your local imam or scholar.
Leveraging our knowledge, here are some answers to the most common Zakat rules questions we receive.
Can I Pay My Zakat in Instalments?
It is acceptable to pay Zakat in instalments, however, Orphans in Need accept Zakat as a single transaction. Paying Zakat in instalments is permitted but only with valid reasoning; therefore, if you have the means to complete your Zakat payment in a single transaction as quickly as possible, it should be completed this way. Despite this, if an individual cannot afford to pay in a lump sum, paying over time is acceptable.
Do I Pay Zakat on my Children’s Wealth?
There are two schools of thought, one designates that only Muslims who have gone through puberty are expected to pay Zakat, however, some communities do expect Zakat when a children’s wealth exceeds the Nisab threshold. Note that there are further facets to this, with some stating that a specific number of months must have passed after puberty for them to become Zakat eligible. You should speak to your local scholar to confirm exactly what your next step should be.
Can I Pay Zakat as a Couple?
Zakat is a personal obligation and must be calculated on individual wealth, however, with your spouse’s permission, your combined Zakat can be paid in a single transaction.
I Have Not Held My Wealth for a Full Hawl, Do I Pay Zakat?
The rules of Zakat state that you must pay Zakat when your held wealth exceeds the Nisab threshold at the start and end of the Zakat year. You can pay Zakat in advance but must take into consideration any responsibilities or liabilities that could affect your quality of life.
During the Zakat Year My Wealth Fell Below the Nisab Threshold, Do I Still Pay Zakat?
Officially, your wealth should remain above the threshold limit throughout the year for Zakat to be due, however, there are schools of thought that believe your wealth should only be above the Nisab threshold at the beginning of the Zakat year (when your wealth first exceeded the Nisab threshold) and at the end of the Zakat year when payment is due.
Again, we advise that you speak to your local Imam or scholar to have this clarified further.
I Have Received A Large Sum of Money Before My Zakat is Due, Do I Pay Zakat on This?
Yes, any held wealth in the Zakat year is Zakatable.
I Give Lots of Charity Throughout the Year, Do I Still Need to Pay Zakat?
Yes, your Zakat is still due as it is the intention of paying Zakat which makes it count. The purpose of Zakat is not only to help those in need but to purify one’s wealth. The intent and desire to contribute is what acts as a catalyst for this purification.
I Haven’t Paid Zakat for Several Years, How Do I Pay What Is Owed?
You should calculate the amount of Zakat due at the end of each Zakat year to the best of your ability and make a payment that incorporates this year’s Zakat amount as well as any previous years or outstanding payments. This can be a lengthy process made easier through good bookkeeping. It’s advised to give yourself plenty of time to calculate your Zakat totals if you are in this situation.
How Are Those Eligible to Receive Zakat Defined?
Orphans in Need distributes your Zakat to the poor and needy. The poor are those who do not hold wealth greater than the Nisab threshold and the needy are defined as anyone living in extreme poverty and doesn’t have enough food to last a day. Through these guidelines, we can utilise your contributions to change the lives of those who are not only eligible to receive Zakat but need your support most.
Can Zakat Be Paid to a Family Member?
Zakat cannot be paid to any family member that is already dependent on you, such as your children. Parents and children should never pay Zakat to each other, although, if another relative is poor or needy, they can be given your Zakat contribution.
Additionally, there are schools of thought which believe that a husband cannot pay Zakat to his wife but a wife can pay Zakat to her husband. Again, consult your local scholar for clarification on this.
When Does the Zakat Year Begin?
The Zakat year does not have a fixed date and begins once your wealth has exceeded the Nisab threshold. The Zakat year is a full lunar year since reaching the minimum held wealth required to pay Zakat. Many choose to pay their Zakat during Ramadan both for the greater rewards offered and to ensure they complete their payment every year without forgetting.
Should I Use the Gold or Silver Nisab Threshold to Calculate My Zakat?
Different schools of thought suggest using one over the other and you should talk to your local scholar or imam to clarify. Using the silver Nisab threshold value will provide a greater Zakat donation, allowing us to help more individuals in need and living in poverty.
I Have Been Saving for Hajj, Do I Pay Zakat on This?
Yes, any savings for Hajj or other causes should be included in your Zakat calculation.
Do I Calculate Zakat on my Pension Fund?
Zakat is only paid on held wealth, also known as liquid assets. If you are currently paying into your pension fund but this is not held in a personal bank account that you have free access to, then it is not required to calculate Zakat.
What is Zakat ul-Fitr (Fitrana)?
Zakat ul-Fitr is not the same as Zakat. Also known as Fitrana, Zakat ul-Fitr is the contribution made on the festival of Eid ul-Fitr before morning prayers. Fitrana contributions equate to one saa’ of food per person, which is four times the amount of staple food (flour or rice) that can be held in two cupped hands (measured as one maad). Fitrana is normally given as a food donation; however, for convenience, Orphans in Need will use your monetary donation and distribute food to eligible individuals in need for you.
How to Donate Zakat?
Orphans in Need are an official Zakat charity and will give Zakat donations to those in need on your behalf. Visit our Zakat calculator to work out how much you need to donate and pay your Zakat online with us.