Zakat Jurisprudence (Part 2)

Zakat on Gold, Silver and Money

Zakat on gold is due only if the gold is in your possession for a full year and its weight is twenty Mithqal or more (one Mithqal is equivalent to 4.25 grams). That is, the gold has to be 85 grams or more.

Zakat on silver is due only if the silver is in your possession for a full year and its value is 200 Dirhams or more. Ten Dirhams are equivalent to seven Mithqal. That is the silver has to be 140 Mithqal or more.

Thus, Mithqal 140 x 4.25 = 595 grams.

Or one Dirham is equivalent to 2.975 grams,

therefore, Dirham 200 x 2.975 = 595 grams

If one possesses both gold and silver but the gold has not reached the minimum amount for zakat, appropriate value of silver shall be added to the gold to lift it to the minimum value for zakat. Likewise, if the silver has not reached the minimum value for zakat, an appropriate value of gold shall be added to the silver to lift it to the minimum value for zakat.

Zakat is also obligatory on gold or silver used by women as ornaments or used for house decoration. Aisha, the wife of the prophet is reported to have said, "I approached the Prophet (peace be upon him) with gold ornaments in my hands and he asked me, 'what is that?' I replied that I wear them for you as ornaments. He said, `do you pay zakat for them?' I said no! He said, 'beware of the hell fire'."

Zakat on women ornaments can be paid from the gold or silver itself or it can be given as an equivalent money value. The gold or silver may be taken to the jewelry shop where it can be weighed and the value of Zakat will be calculated at 2.5% of the total value of gold or silver at the time.

Pearls, diamonds and other types of precious stones do not attract Zakat, unless if they are used for trading, in which case they will fall under the category of Zakat on trade.

Zakat on money (cash) is paid only if the amount of money is equivalent to 85 grams of gold or more. (That is 340 Rials if the value of gold is 4 Rials per gram). The amount of money on which zakat is due includes, (a) money lent to others which you expect to be paid back, (b) money borrowed from an institution and put in a business as a capital, and (c) the value of shares and bonds at the time when zakat is paid, and any income obtained from shares and bonds (dividend) even if that income is not in one's possession for one complete year.

The amount of zakat to be paid is two and a half percent (2 1/2%) of the total wealth. Zakat can be calculated on each possession individually or it can be calculated by adding together the value of each possession and then calculate the zakat on the total.

Example

A person owns the following wealth:

1. 100 grams of 22 carats gold whose value in the market is 4 Rials per gram

2. Cash worth 2000 Rials

3. Cash worth 1000 Pounds, exchange rate in the market is 600 Baizas per Pound

4. Cash worth 3000 Dollars, exchange rate in the market is 385 Baizas per Dollar

5. Shares in the Fish Company whose current value is 10,000 Rials, and a dividend of 1000 Rials (even if this dividend has not completed one year in his possession)

6. Money lent to somebody worth 5000 Rials

7. Gold ornaments of various carats for his wife whose total market value is 1400 Rials

Calculation of zakat on the above wealth, once it has completed one year in one's possession, is as follows:

Value of gold 100 x 4 =Rials 400 

Cash =Rials 2000

Cash in Pounds 1000 x 0.600 =Rials 600 

Cash in Dollars 3000 x 0.385 =Rials 1155

Shares plus dividend

10 000 + 1000 =Rials 11 000

Money lent =Rials 5000

Gold ornaments =Rials 1400

Total =Rials 21 555

Zakat to be paid = 21 555 x 2 1/2% = Rials 538 and Baizas 875

Out of this the zakat for the gold ornaments which the wife is obliged to pay will be; 1400 x 2 1/2% = Rials 35

Zakat on Earnings from Employment

Earnings from employment include salary and income from self employment such as when one works in his own carpentry shop or a doctor working in his own clinic and so on. Zakat on earnings is calculated on the balance of money left after paying for the daily living expenses and after paying for any debts or other business expenses. Zakat is due only if the cumulative balance from the earnings at the end of the year is equivalent to the value of 85 grams of gold or more, that is about 340 Rials, if the value of gold is 4 Rials per gram. It is calculated at 2 1/2% of the balance money.

Example 1 — Zakat on salary

A person earns a salary of 1000 Rials per month. He spends 600 Rials on his daily living expenses and the remaining he keeps as savings.

Salary for the year 1000x 12 = Rials 12000

Living expenses for the year 600 x 12 = Rials 7200

Savings for the whole year 12000 — 7200 = Rials 4800

This balance amount is more than the value of 85 grams of gold and hence zakat is due on it and is calculated as follows:

4800 x 2 1/2% = Rials 120.

Example 2 - Zakat on earnings from self employment

A doctor runs his own private clinic and his expenses and earnings are as follows:

Income per year = Rials 20000

Employees salaries = Rials 4000

Rent paid for the building = Rials 2000

Expenses to run the clinic = Rials 1500

Other expenses = Rials 1000

His daily living expenses amount to Rials 500 per month.

Considering all the above, if the net profit at the end of the year is equivalent to the value of 85 grams of gold (that is about Rials 340 if the value of gold is 4 Rials per gram) or more, zakat has to be paid on this profit at the rate of 2 1/2 %.

Income per year = Rials 20000

Total expenses= Rials 8500

Net profit 20000 — 8500= Rials 11500

Daily living expenses 500 x 12= Rials 6000 

Amount due for zakat 11500 — 6000= Rials 5500

Zakat will be 5500 x 2 1/2% = Rials 137.500

Zakat on Trading and Industry

In trading, the zakat is due on stock, goods and capital employed in buying and selling. There is no zakat on equipment used in conducting the trade such as vehicles, tools or animals used for carrying goods.

In industry the zakat is due on the profits made from the factory products, whether the products are final products such as shoes or canned fish, or the products are feedstock or raw materials for other industries, for example, chemicals which are used to produce medicines by other factories.

Zakat is also due on trading in shares and bonds and in money changing business.

The zakat is due if the income is equal or more than the equivalent value of 85 grams of gold and if the income is in one's possession for a year. The zakat is calculated at 2 1/2%.

Method of calculation

In trade, the value of goods and stock in the shop, stores and in the farm (if one is trading in cattle for example) is calculated on the basis of the current market value. If this total value is equal or more than the equivalent value of 85 grams of gold, the zakat will be calculated at 2 1/2% of the total value.

In industry, the zakat is on the net profit made from selling the products. All expenses in running the factory, such as cost of machinery, raw materials, salaries and so no, are deducted from the gross income to get the net income. If the net income is equal or more than the equivalent value of 85 grams of gold, the zakat will be calculated at 2 1/2% of the net income.

The above calculation of income is in fact the normal exercise done by big businesses at the end of the year to calculate the financial status of the business (balance sheet).

Zakat on Buildings and Other Properties

Zakat is due on income generated from (a) a property such as a building which is rented, (b) vehicles which are used for carrying passengers or for carrying goods, (c) cattle which are kept for trade or for selling their products such as milk, (d) chicken kept for trade or selling the eggs, and so on.

The zakat is calculated on total income generated during the year. The zakat is due only if this total income is equal or more than the equivalent value of 85 grams of gold.

Method of calculation

Example 1 Rented buildings

A bloc of flats was constructed at a cost of Rials 100,000. The total income generated from renting the flats is Rials 1200 per month. The following are the running expenses on the building:

Monthly salary for the house guard =Rials 80

Maintenance cost for the whole year =Rials 500

Yearly electricity charges for staircase lights =Rials 140

Municipality charges are Rials 50 per year.

The zakat for this example will be calculated as follows:

Yearly income 12 x 1200 =Rials 14400

Salary for the house guard 12 x 80= Rials 960 

Maintenance costs =Rials 500 

Electricity charges = Rials 140 

Municipality charges per year =Rials 50 

Total expenses = Rials 1650

Net income 14400 - 1650 = Rials 12750

As the owner of the building has another source of income for his living, his living expenses are not deducted from the net income. The net income is more than the equivalent value of 85 grams of gold and hence the zakat is payable on the income.

Zakat =12750 x 2 1/2% = Rials 318.750

Example 2 - Passenger cars

A person owns a bus worth Rials 10,000 which he uses to carry passengers. He has a debt of Rials 800. His expenses and income for the whole year are as follows:

Driver's salary= Rials 1600 

Petrol = Rials 750 

Bus licence = Rials 50

Maintenance charges = Rials 400

Total expenses =Rials 2800

Total income = Rials 5400

Net income 5400 2800 = Rials 2600

Debt = Rials 800

Amount on which zakat is due 2600 - 800 = Rials 1800

Zakat =1800 x 2 1/2% =Rials 45

Example 3 - Dairy farming

A person runs a dairy farm whose total property value is Rials 8000 which includes cows worth Rials 4000 and machinery worth Rials 4000. His income from milk and other dairy products is Rials 5000. He also sold manure at Rials 1000. He has no debt.

The following are his expenses and income for the year.

Expenses on animal feed = Rials 2000

Wages for the workers = Rials 1000 

Rent for the land = Rials 400

Miscellaneous expenses = Rials 300

Total expenses = Rials 3700

Total income =Rials 6000

Net income 6000 - 3700 = Rials 2300

Zakat = 2300 x 2 1/2% = Rials 57.500

Zakat on Harvest

Zakat is payable on harvest such as dates, grapes, wheat, barley, rice and so on. Zakat is not payable on vegetables, tomatoes, cotton, sisal, unless if they are grown for business in which case the zakat falls under the category of zakat on trade.

Zakat on harvest and its income is not paid after a year, but it is paid after each harvest, even if the harvest is twice a year, provided the amount of crops meets the criteria for zakat. Allah says in the Holy Qur'an:

(وَآتُواْ حَقَّهُ يَوْمَ حَصَادِهِ)

"Render the dues that are proper on the day that the harvest is gathered." [6:141]

The Prophet (peace be upon him) has said: "For whatever is irrigated by the sky (i.e. rain) and springs, one-tenth (1/10). And for whatever is irrigated by means of buckets (i.e. by other means), one half of one-tenth (1/20)." Related by Al-Rabii ibn Habib (Al Jami' Al Sahih, Hadith No: 331)

Zakat on dates, grapes, wheat, barley, rice and so on is payable only if the amount harvested reaches 300 Saa', (about 653 Kilos or 1500 Pound). In the case of dates the zakat is calculated on the sum of the weights of individual types of dates, where as in the case of grains the zakat is calculated separately for each type of grains i.e. wheat separately, rice separately and so on.

The zakat on harvest is calculated at 10% of the harvest if the fields are watered (naturally) by rain, river or a spring. For example, for every 1000 kilos of wheat the zakat will be 100 kilos of wheat. If the fields are watered by other means such as buckets, water tankers or by the use of animals to carry the water, the zakat is calculated at 5% of the total harvest. For example, for every 1000 kilos of wheat the zakat will be 50 kilos of wheat. The zakat can also be paid in money using the prevailing market price of the crops.

The crops from the fields which are consumed by the owner or given to relatives or neighbours before the harvest season are not included in the calculations for zakat. This consumption, however, must be without excess.

As mentioned earlier, zakat on vegetables, tomatoes and so on is payable if they are grown for business in which case the zakat falls under the category of zakat on trade which is 2 1/2% of the net income from the fields, paid on a yearly basis.

Method of calculation

Zakat on harvest is calculated after deducting all expenses incurred such as expenses on seeds, manure, ploughing the land and so on. Also deducted from the total income are your daily living expenses and associated loans which you have taken for the farm.

Example 1 - Farmland owned by the individual

A person owns 10 acres of land on which he has cultivated wheat. He harvested 20 tons (20000 Kilos) of wheat. The market value of the wheat is Rials 200 per ton, or 200 Baizas per kilo.

Total income 200 x 20 = Rials 4000

Running expenses on the farm = Rials 500

Loan payment = Rials 1600

Total expenses 500 + 1600 = Rials 2100

Total income = Rials 4000

Amount on which zakat is due 4000 - 2100 = Rials 1900

Zakat 1900 x 10% = Rials 190

If one wants to give the wheat as the zakat, the weight of wheat to be given out as zakat will be calculated back at Baizas 200 per kilo. Thus,

Zakat = 190/0.200 =950 kilos

We have seen from the above example that from the total income we deducted all expenses and loans and then taken 10% of the remaining money as the zakat to be paid. However, if we are to calculate the zakat without deducting all expenses, zakat will be calculated at 5% of the total income from the farm.

Thus;

Total income = Rials 4000

Zakat 4000 x 5% =Rials 200

If zakat is paid in wheat;

20000 x 5% = 1000 kilos of wheat

As it can be seen from the above, the difference in zakat between the two methods is minimal.

Example 2- Joint venture between land owner and the farmer

A person owns 20 acres of land and enters into a joint venture with a farmer who will cultivate the land and share the income equally after deducting all expenses. The farmer cultivates the land to produce cotton and grass (for cattle feed).

Total income from cotton is Rials 3500 and from cattle feed is Rials 1500.

Expenses on cotton cultivation are Rials 900 and on cattle feed cultivation are Rials 350.

Expenses on feeding the farm animals are Rials 1000.

Loan amount is Rials 600.

The zakat on the above example is calculated as follows:

Income from cotton = Rials 3500

Income from cattle feed = Rials 1500

Total income 3500 + 1500 = Rials 5000

Expenses on cotton and cattle feed cultivation = Rials 1250

Expenses on feeding farm animals = Rials 1000

Loan =Rials 600

Total expenses 1250 + 1000 + 600= Rials 2850

Amount on which zakat is due 5000 - 2850 =Rials 2150 

Zakat 2150 x 2 1/2% = Rials 53.750

Hence, each person in the joint venture will pay Rials 26.875 on zakat.

Example 3- Rented farm land

A person rented 10 acres of land to a farmer at a yearly rent of Rials 600. The farmer cultivates vegetables on the land.

Income from selling the vegetables = Rials 5000

Vegetables consumed by the farmer = Rials 300

Expenses on the farm and cultivation =Rials 1200

Debt associated with the farm owed by the farmer =Rials 400

Debt owed by the land owner = Rials 150

Expenses on the water pump - Rials 500 

The zakat to be paid by the land owner is calculated as follows:

Income from the rent =Rials 600

Loan = Rials 150

Amount on which zakat is due 600 - 150 = Rials 450

Zakat 450 x 2 1/2% = Rials 11.250

The zakat to be paid by the farmer is calculated as follows:

Total income from the farm 5000 + 300 = Rials 5300

Rent for the land =Rials 600

Expenses on the farm and cultivation = Rials 1200

Debt associated with the farm =Rials 400

Total expenses 600 + 1200 + 400 = Rials 2200

Amount on which zakat is due 5300 - 2200 = Rials 3100

Zakat 3100 x 2 1/2% = Rials 77.500

Zakat on Animals

Zakat on camels, cattle, buffalos, goats and sheep is payable only if these animals are kept for reproduction and are fed by grazing. Zakat is not payable on other animals such as horses, donkeys and others, except if they are kept for the purpose of business in which case they will fall under the category of zakat on trade. There is no zakat on animals who are engaged in work such as in ploughing the fields or pulling bull carts and so on.

Zakat is payable only if the number of camels or cattle are five or more. In the case of goats or sheep zakat is payable only if the number of goats or sheep is forty or more. In calculating Zakat, the number of goats and sheep may be combined and the number of cattle and buffalos may be combined. When combining the animals, zakat will be taken from the animals which are in larger number. For example, in combining goats and sheep the zakat will come from goats if the number of goats is more than the sheep. If the number of goats and sheep is the same then zakat can be from goats or sheep.

Zakat on animals is payable when the animals are in one's possession for a period of one year, i.e. it is payable at the end of a year. Animals which are born during the year are also included in the calculation of zakat even if they have not completed one year at the time of paving the zakat. If a group of animals is owned by more than one person, the zakat will be calculated on the whole group of animals. The animals given out for the zakat should be of average condition, neither the best of them nor the weakest of them.

Zakat on camels and cattle

Zakat on camels and cattle is calculated on the same basis. 

Number of camels or cattle		Zakat payable
5 - 9		One goat
10 - 14		Two goats
15 - 19		Three goats
20 -24		Four goats
25 - 35		A new born camel or cow of one year if female or two years if male
36 - 45		A new born female of two years
46 -60		A new born female of three years
61 - 75		A new born female of four years
76 - 90		Two new born females of two years
91 - 120		Two new born females of three years
Above 120	For every 40	One new born female of two years
	For every 50	One new born female of three years

Zakat on goats and sheep

Number of goats or sheep	Zakat payable
1 - 39	None
40 - 120	One goat or one sheep
121 - 200	Two goats or two sheep
201 - 300	Three goats or three sheep
For every 100 above the 300	One goat or one sheep

Zaktul Fitr

Zakatul Fitr is the zakat which is paid at the end of the month of Ramadhan. The name is derived from the word far which means breaking the fast. This zakat is also known as Zakatul Abdaan, which means zakat of the body as it purifies the soul and the body. It was narrated that Ibn Abbas said: “The Messenger of Allah (peace be upon him) prescribed Zakatul Fitr as a purification for the fasting person from idle talk and obscenities, and to feed the poor." (Related by Abi Dawud & Ibn Majah).

This zakat is paid in the morning of the first day of festivities (Eid) following the month of Ramadhan. The Prophet, peace be upon him, made this zakat mandatory in order to expiate one's mistakes committed during the month of Ramadhan. This zakat is due for every member of the household. It is paid by the head of the family on behalf of every member who is financially his dependent.

The prophet, peace be upon him, has said, "Zakatul Fitr is obligatory for the rich and the poor; for the rich, Allah purifies his soul, and for the poor. Allah recompense him many folds". The companions of the prophet who were not well off used to pay their Zakatul Fitr from the zakat which they have received from others.

For Zakatul Fitr each person has to give out one Saa' (about two kilos and fifty grams) of wheat, barley, corn, rice, or any staple food which is ordinarily eaten in the community. One may also give out raisins or dates.

It was narrated that 'Aishah (Mother of the Believers) said: "The Messenger of Allah enjoined Zakatul Fitr on the free and the slave, the male and the female, the young and the old; one Saa' of dates, or one Saa' of raisins (dried grapes), or grain, or barley, or of cheese." Related by Al-Rabii ibn Habib (Al Jami' Al Sahih, Hadith No: 332).

The Prophet, peace be upon him, has said, "Zakatul Fitr is a purification for the one who fasted during the month of Ramadhan, and it provides food to the poor". According to this tradition of the Prophet, it is not acceptable to give out money for Zakatul Fitr, unless there is no one who will accept food.

The zakat is, given to the poor in the morning of the first day of festivities (Eid) before the Eid prayers. One may also give it out the previous night. Zakat which is given after the Eid prayers is considered as ordinary charity and not Zakatul Fitr. The aim here is that after the Eid prayers all Muslims have provisions for the day of festivities.

References:

1.    Zakat Obligatory Charity Its Rules and Regulations, by Sheik Nasser Al-Kindy

1.    Zakat, Ministry of Endowments and Religious Affairs