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.
The principle governing the levy of Zakah is that only those assets are zakatable, which fall within the definition of money, like silver and gold. All other assets are not zakatable unless they are meant for trade and resale.
Secondly, only the balanced value of these assets at the end of the year is the subject matter of Zakah. No Zakah is obligatory on the amount spent over the whole year.
General conditions for all zakatable assets
The subject matter of Zakah must be in the complete ownership of the payer. If someone possesses an asset but does not own it, Zakah is not liable on it.
2- Potential of growth
The asset must have the potential of growth as the word Zakah itself means “Growth” or “Increase”.
3- Asset must be in excess of basic necessity
The subject matter of Zakah should be other than the basic necessities of a person. So the assets included in the basic necessities e.g. crockery, furniture, car etc are not the subject matter of Zakah provided that these assets are not purchased with the intention of sale.
4- One year must elapse over the asset
It is necessary that one year elapses over the asset which is subject to Zakah.
It means that possession of nisaab value should be both at the beginning and end of a lunar year. It is not necessary that a complete year passes on every single rupee. Rather, when a person is sahib-un-nisaab in the beginning and the end of the year, then he will be considered as sahib-un-nisaab and the fluctuating amount during the year will not be considered as the subject matter of Zakah.
A detailed clarification is as follows:
If some one acquires a property before the completion of his Zakah year and he is the owner of the wealth above the value of nisaab, then one of the following situations may arise:
a) The addition during the year is not the same kind or category as the existing property. For example, a person has gold or silver and thereafter during the course of the year acquires sheep.
b) The addition is of the same kind or category as that of the existing property. This addition may be derived from the existing property, for example, profit arising during the year from sale of trading stock; or acquired from another source, for example, a person has cash and thereafter during the year acquires further cash by way of inheritance.
In case ‘a’, the year for the gold or silver and sheep will be calculated separately.
However, in case b, the subsequent acquisition will be added or joined to the existing property for Zakah purposes and the Zakah for both will be paid together at the end of the Zakah year for the existing property. In other words, Zakah years will not be calculated separately for each subsequent acquisition in case ‘b’.
It should be kept in mind that if the subsequent acquisition is made after the expiry of the Zakah year, then a new year will be calculated. Similarly, if the existing property is below nisaab, the subsequent acquisition cannot be added to the existing property.
5- Asset must be equivalent to Nisaab
Zakah is not levied on total assets if they are below the level of Nisaab.