A person ‘X’ is a manufacturer of clothing. He has the following assets and liabilities at the end of the Zakah year.
1. House 2,000,000
2. Furniture & Household Effects 25,000
3. Motor Vehicle 600,000
4. Gold 100,000
5. Diamonds 50,000
6. Cash 1,500,000
7. Stock-in-trades 1,000,000
8. Machinery 500,000
9. Receivable from others 800,000
10. Vacant Land 800,000
11. Bank overdraft 50,000
12. Trade creditors 500,000
13. Loans 700,000
Total Liabilities 1,250,000
Calculation of Zakah
Assets subject to Zakah Read more... (366 words, 1 image, estimated 1:28 mins reading time)
One is not obliged to distribute the Zakah by himself to the entitled recipients. He may validly appoint an agent (whether natural person or organization) to pay the Zakah on his behalf.
In appointing such an agent, the Zakah payer must bear in mind that the Zakah obligation is not discharged if the agent fails to distribute the Zakah to the entitled recipients. At the same time, possession of the Zakah amount by the agent will be deemed to be possessed by the principal (Zakah payer) as in the case of those organizations, who are guilty of serious maladministration by collecting Zakah and not distributing the same for a number of years without valid reason. Read more... (589 words, estimated 2:21 mins reading time)
For a common person (one who is not involved in livestock or agriculture) all that needs to be taken into account for Zakah calculation is the following:
The amount of cash owned (be it on person, in the bank, or loaned out. This can be money earned or income from additional house, properties etc.) as well as the value of any gold or silver jewelry owned, (necklaces, watches, etc. but not the gems or stones within them), and also, if one is involved in trade, then the value of one’s stock/merchandise at that time constitutes one’s accountable total. Read more... (815 words, estimated 3:16 mins reading time)
Zakah is payable on trading stock if their market value is equal to or more than the value of nisaab.
Definition of trading assets
Trading assets are those, which are purchased with the intention of resale or capital gain. Consequently, goods that have been purchased for personal use and not for the purpose of trade are not subject to Zakah, irrespective of their value. Similarly, goods (other than gold and silver) originally bought for personal use are not subject to Zakah if the purchaser subsequently intends to sell them for trade and had not intended it at the time of purchase. Once sold, however, their sale price would be subject to Zakah. Read more... (769 words, estimated 3:05 mins reading time)
The amount of Zakah payable is two and a half percent (2.5%), or 40th portion of:
1. the value of gold and silver if it is equivalent to nisaab or above it.
2. trading stocks, or its value at the time of obligation of payment of Zakah, if the stock is equal to nisaab.
3. cash on hand if equal to nisaab.
Zakah on gold and silver
• Gold and silver are subject to Zakah regardless of whether they are owned for personal use or otherwise if the weight thereof equals the prescribed nisaab and one year elapses thereon. Gold and silver are also always liable to Zakah irrespective of the asset type (gold bar, jewellery, ingot, coin etc.) Read more... (715 words, estimated 2:52 mins reading time)
Allah Ta’ala has put the most minimum burden of monetary obligations on Muslims so that paying Zakah becomes convenient for every sahib-un-nisaab Muslim.
Firstly, it is not obligatory to pay Zakah on every asset. Rather only those assets are the subject matter of Zakah that have the potential of growth or increase. These assets may be broadly classified as follows:
1- Trading assets.
2- Cash & Cash Equivalent (like prize bonds, Travelers Checks etc)
3- Gold and silver
4- Livestock (goats, sheep, cows and camels)
5- Agricultural output. Read more... (642 words, estimated 2:34 mins reading time)
The Holy Quran has fixed eight categories of recipients in verse 60 of the Surah Taubah.
“The Sadaqat (prescribed alms) are (meant) only to be given to the poor, the needy, to those employed to collect them, to those whose hearts are to be won, in the cause of the slaves and those encumbered with debt, in the way of Allah and to a wayfarer. This is an obligation prescribed by Allah. Allah is All Knowing, Wise.” (60)
There is a consensus amongst the jurists that the disbursement of Zakah is solely confined to these eight recipients. The Holy Prophet was once asked by a Companion to give the latter Zakah. The Holy Prophet replied: Read more... (1641 words, estimated 6:34 mins reading time)
Debts can be classified into two types:
- Receivables i.e. owed to oneself e.g. Loans given to somebody.
- Payable to others e.g. Money borrowed from somebody.
Debts receivable from others
There are different types of debt receivables. The ruling of Zakah for each kind of debt receivable is different from the other. It is therefore pertinent to first understand all these types of debts receivable.
Types of Debts Receivable
Imam Abu Hanifah (R.A.) has classified debts into three categories, namely: Read more... (506 words, estimated 2:01 mins reading time)
- Trade Debts
- Non-Trade Debts
- Other Debts
Payer of Zakah
Zakah must be paid by the one who is:
2- Major (Baligh)
4- Sahib-un-nisaab (owner of wealth above the level of nisaab)
Above-mentioned four conditions are described respectively in the following lines: Read more... (366 words, estimated 1:28 mins reading time)
- Zakah is not obligatory on a non-Muslim as Zakah is an ibadah (an act of pure worship) and a non-Muslim is not obliged to carry out the ibadah of Islam.
Lexically, the word Zakah covers two meanings.
2. Growth and increase
In the terminology of the Quran and Sunnah, Zakah is the portion of asset that is made mandatory to be spent in the ways specified by Allah Ta’ala.
Benefits of Zakah
Zakah has two straightforward benefits.
Firstly, the payer himself gets purified from inner germs of the spiritual diseases.
Secondly, Zakah helps those who are not able to fulfill their needs independently. For e.g. orphans, widows, handicaps, poor people etc.
Allah Ta’ala says in Surah Taubah: Read more... (383 words, estimated 1:32 mins reading time)