Paying and Calculating your Zakat

Many have asked me this..so this is what I wrote down..and since those idiots at HELIUM can’t understand… so I might as well share this with you.

The payment of Zakat or Tithes are mandatory in Islam as how taxes are due in the modern world today. Being part of the 5 pillars of Islam which are "To recite the Shahadah or Oath of Allegiance" , "Pray 5 times a day" , "Fast in Ramadan", " Pay your Zakat" and perform the Hajj (if permissible), Zakat plays a very important role in the social and spiritual aspect of one's faith to Allah, the One God of the Universe.

Although it is MANDATORY, Zakat is only payable should the "Nisab" or literally means Calculations are met, similar to the personal allowances in a tax return and not just be paid during Ramadan itself (in which the Zakat Fitrah is payable for all). There are many kinds of Zakat, namely the Fitrah (paid during Ramadan), Salary, Business Profits, Gold and Jewellery, Agriculture Harvests and Savings. Although calculations for Zakat are complex, it is broken down to the following:

·          Zakat Fitrah - 2.7 Kg of Rice payable per person (in cash or grain) alive in Ramadan and Syawal ,including newborns.

·          Jewellery : At the rate of 2.5% of the excess of any jewellery worn kept for a year which is more than 800grams of gold and / or 200 Silver Dirhams  or 595 Grams of Silver with a purity of more than 75%,where there are precious stones embedded, 0.05grams are deducted per small stone and 0.5 grams for big ones ( more than 1 Karat )

·          Bullion : The excess of 20 misqals or about 85 grams of gold (20 Gold Dinars) at the rate of 2.5%, and whereupon there is a mix of gold and silver, at the rate 7 Dinars to 10 Dirhams where one Gold Dinar is 4.5Grams of Gold of 22K (91.6 Pure Gold) and the worth of one Dirham is 3 Grams of Pure Silver , as related by Umar Ibn Al-Khattab ( A right hand man of Prophet Muhammad ).

·          Cash Savings : The excess of the currency equivalent of Gold Bullion. (Convert all cash and Gold Bullion to the above rate, there is no promissory credit notes to be paid for Zakat). This includes any dividends and share holdings at value of 1^st Muharram of the Hijrah Year.

·          Business or Agriculture Harvests: At the rate of 2.5% of the NET PROFIT for Business, Rents / Leases, Herding, Farming or Breeding of Animals and 5% for agricultural activities next to a water source (river) and the GROSS ACQUISITION rate at 20% of any bullion or precious stones mining activities.

·          Personal Working Income : At the rate of 2.5% of the NET DISPOSABLE INCOME (money you can save) above 20 dinars, where your nett income is derived from the total of all your gross pay, less your commitments such as housing,food,education, transport, necessities such as decent clothings (not flashy or extravagant means), home furnishings and the such. You must also pay off ANY DEBTS FIRST before deriving to your net disposable income.

Where you have many income,savings, shares and businesses, then the payable rate is 2.5% of the TOTAL AMOUNT (less any debts which you must pay first) above the 20 dinars threshold. At today's rate 2.75 Oz of Gold simply put it, for those who have a headache calculating the dues. Or approximately USD4000 at 2010 Thanksgiving rate of USD1400/oz.  In mathematical terms, total sum of Zakat payable is 2.5% of the sum of [all Gold Jewellery-800Grams] + [all Silver Jewellery – 595Grams] + [Net Amount of {Income+business+normal agriculture}+shares+savings – 20 Dinars / 85Grams/ 2.75 Troy Oz ] and 20% for mining activities plus the agriculture surcharge is next to a waterway.

If one is poor and don’t reach the savings threshold of 20 Dinars or still owes people money (deficit), the Zakat is not due to them.

MEN ARE PROHIBITED FROM WEARING JEWELERY and as such, any jewelery of a Single UNMARRIED Man is to be assessed TOGETHER with his CASH ASSETS.Where he is a widower and these are assets at trust for his children by inheritance of their mothers, no Zakat is due and he should invest their savings so that there are profits for them.

There are rules for Zakat (other than Fitrah) payment which are from HALAL MEANS (does not include anything related to interest taking, pigs, gambling, criminal activities,bribery and those that cause harm such as tobacco,drugs, vice,fortune telling and blasphemous activities including witchcraft and in the terms of Business and Property transactions, must not be related or rented or leased out to NON HALAL ACTIVITIES), FREE MAN (independent), Free Holding of Assets to be used to pay for Zakat (not owned by someone else or on loan) and of Sound Mind.

As a social aspect, Zakat acts just as how tax are collected. Revenues for the government and in terms of Islam, it is just a Socialist and Communal system where the collections of Zakat are pooled together and divided into 8 different purposes, similar to a payable accounts, for which in this case are the Destitute (Extremely Poor / Fakir ), In need or the poor ( Below the taxable band / Miskin ), Traveler or someone on a voyage and ran out of funds or supplies ( such as going on the Hajj and got stranded / Musafir) , Newly Converts ( Mualaf ), Collector of Zakat ( the 'Amil' does need to eat right? ), Slaves who is in need to gain independent or in the new age those heavily in debt ( they were sold as slaves if they can't pay in those days ), Orphans / Widows and Single Parents and those working for the path of Allah or Jihad or Fisabillilah.

Don't get the wrong idea that Zakat is paid to fund terrorists claiming Jihad, where in those days, Jihad is to work for Allah , similar to the nuns and defenders of the religion and in the modern day aspect, claiming for Jihad is to find others who have strayed and convert them or show then to the Path of Allah (Missionaries), Teaching, Leadership (Iman, Khatib, Khalifah), Saving other people's lives and for the women, to perform the Hajj.  In the social aspect in comparison to other religion such as Christianity or Judaism, these are similar values preached by many, for humanity.

Even such a thing that if one is wanting to start his own business and don't have the money to start it up, the Baitulmal or Administrator of Zakat will approve such a dispersement to start the business as this falls under Miskin where one must be in hardship to better themselves, and if they do have the money to have their own business, why they come after the zakat for assistance, correct? The social welfare system of the 620AD is a well governed and lubricated machine such that many Zakat administration bodies have too much money with little to do as many don't wish to lose face when faced with problems for the fear of negative stigma and that the money they are asking for is not theirs to enjoy as it's more of a heavier responsibility for it's God's Money! Similar to the Vatican, the British Islamic communities have saved up over 2.1BILLION POUNDS in saving trusts for the Mosques or Khairats (Community Grievance Trust Funds to manage deaths in the community among members) within the United Kingdom alone and assets of nearly 5 Billion Pounds in Property and Gold Depositories.

With so much money, no wonder the Muslim communities are thriving everywhere as the assistance is available anywhere. It is always nice to give to others than to receive and it's a taboo not to donate to the mosque when coming in for congregation such as Eid, Friday Prayers, Tarawih and Special Prayers as Allah promised to return the act of faith 49 times or even up to 700 times for those who are married, men or women. But those who are stingy will always have ill betrothed upon them such as ILL HEALTH, and many other means and an act of Faith of Jihad is to give all you can for the cause , for the Path of Allah. Zakat is not just about Islam but humanity and community action for sometimes, a church may ask for donations for a community even, such as inter faith get together like on Independence Day  or someone who had an accident for all these kind gestures are alike to Missionaries back then, and those who are in need always remember the act of kindness of those who provided help.

However, Muslims have to be fearful of Allah's wrath for those who do not wish to pay their Zakat is promised with Hell Fire and that "on the day of Judgement , the Gold and Silver will be melted and poured into their throats, and this is what they have been saving up on Earth, so taste of your doings" and sometimes, Allah sends His collectors in these world, to test out our faith, for it is said that if someone comes to you for alms,give something for you may not know that what you gave away is what could have brought you to Hell and that you will see that Allah will return the money back to you in many other ways that one cannot even think of, for He is All Knowing, All Wise, Truly Merciful.

It's always nice to see you are being appreciated when you  give help to others, and in many places, Zakat money is used to buy kidney dialysis machines, life support equipments, hospital kits and during disasters, food, clothes , shelter and many more. Some countries such as Malaysia, Singapore and most Muslim countries allow the Zakat being paid in lieu of normal income taxes due as opposed to Charitable Relief Deductions.

 

Sources: FSA UK, 2010 (Sukuk and Islamic Finance Reports), Holy Quran, Sunnah Rasul