How to Calculate Zakah? A Comprehensive Guide to General Assets and Salary Zakat

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Asmaa Tech Content

2/3/2024

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Calculate Zakah: Zakat, one of the Five Pillars of Islam, is a form of almsgiving and a religious obligation for all Muslims who meet the necessary criteria of wealth.

This guide provides a comprehensive methodology for calculating Zakat on various assets, including cash wealth, precious metals, investments, livestock, and agricultural produce.

The calculation involves determining the Zakat rate of 2.5% and subtracting outstanding debts before applying the rate to the total value of Zakat-eligible assets exceeding the Nisab threshold. Zakat plays a crucial role in supporting those in need and fostering unity within the Muslim community.

Read on to find out how you can fulfill this important religious obligation with accuracy and peace of mind.

Zakah Calculation:

To calculate Zakat on wealth in Islam, you determine the Zakat rate, which is 2.5% of the total saved wealth. Simply put, this percentage is also known as one-quarter of ten. For every thousand units of currency, fifty units are given as Zakat.

Therefore, you can calculate the Zakat amount by dividing the total wealth by 40, which yields the Zakat due. Zakat is obligatory on wealth that exceeds the Nisab threshold and has remained in one's possession for a full lunar year.

Calculating Zakat on cash wealth can be done easily using two methods. For instance, let's consider calculating Zakat on one million Saudi Riyals:

The first method involves dividing the total wealth (one million Riyals) by 40, which results in twenty-five thousand Riyals, the amount of Zakat due.
The second method is by multiplying the amount by 2.5%, assuming the calculation is based on the Hijri lunar year. So, (1,000,000 x 2.5) divided by 100 equals twenty-five thousand Riyals.

These calculations apply similarly for Zakat on precious metals and gemstones, where Zakat is 2.5% of their current market value. For investment accounts, bonds, stocks, and bank deposits, Zakat is calculated at 2.5% of the total amount or the amount plus profits, depending on the specific details.

For livestock, such as camels, cows, and sheep, Zakat is calculated based on specific thresholds and varies according to the number of heads owned. Additionally, Zakat on crops and agricultural produce is due when they reach the Nisab threshold, typically equivalent to 653 kilograms, and is payable at harvest time, not necessarily at the completion of a full Hijri year.

Zakat plays a vital role in maintaining strong and cohesive communities, enabling those in need to access life's essentials and fostering unity among Muslims. Your support and donation to those eligible for Zakat contribute to this noble cause.

How To Calculate Zakah

The calculation of Zakat depends on the type and value of assets a person possesses. To know how much is Zakat?, Here's a general guide on how to calculate Zakat:

1. Determine The Holdings That Are Subject To Zakat

Zakat is due on specific types of holdings. These include not just liquid assets like cash savings, but also physical assets like gold and silver, financial investments such as stocks and bonds, and even income generated from rental properties.

Some scholars also include agricultural produce and livestock in the list of Zakat-eligible assets.

2. Calculate The Actual Worth Of Each Holding

To get an accurate Zakat amount, you need to know the actual worth of each holding. This involves calculating the money you have saved in your bank accounts, the current market value of your gold and silver, and the worth of any other investments you might have.

For investments like stocks, it's important to consider their current market value rather than the purchase price.

3. Subtract Any Outstanding Debts

Before you calculate Zakat, you can subtract any outstanding debts you may have. This includes not just long-term debts like mortgages, but also short-term obligations like credit card balances or personal loans.

Some scholars advise that only immediate debts should be deducted, not long-term debts that are not due immediately.

4. Determine The Nisab

Nisab is the minimum threshold that makes Zakat obligatory. It is approximately equal to the value of 85 grams of pure gold or 595 grams of silver.

The Nisab value can fluctuate based on current market rates for gold and silver, so it's important to check these rates at the time of calculation.

5. Calculate The Zakat Rate

The standard Zakat rate is 2.5% of the total value of assets that are subject to Zakat.

In some cases, like agricultural produce, the Zakat rate may differ. It's advisable to consult religious authorities for specific rates.

6. Calculate And Pay Zakat

Once you've gathered all this information, you can calculate your Zakat. Apply the 2.5% Zakat rate to the total value of your assets that exceed the Nisab. After calculating, you have the option to pay your Zakat to a reputable charity or distribute it directly to those in need.

Zakat can be distributed to eight categories of recipients as mentioned in the Quran, including the poor, the needy, and those employed to administer Zakat.

It is important to note that the above steps provide a general guide on how to calculate Zakat. But, there may be specific rules and regulations depending on the country, region, or sect of Islam.

It's always best to consult with an eligible religious authority or expert in Zakat calculation to ensure accuracy and compliance.

How To CalculateSubtract Zakat On Salary

You can determine how much Zakat to pay on salary by calculating 2.5% of your yearly net revenue. Here is how to calculate Zakat on salary:

1. Calculate Your Net Revenue

The first step is to calculate your net revenue, which is your gross annual income minus any deductions like taxes, social security, and other mandatory contributions.

If you receive bonuses, commissions, or any other additional income during the year, these should also be included in your gross income before deductions.

2. Subtract Your Essential Expenses

Next, you'll need to subtract your essential living expenses. These include rent or mortgage payments, utility bills, food, and medical expenses.

Essential expenses do not include luxury items or optional activities like vacations or dining out. Only the basic costs needed for day-to-day living should be deducted.

3. Calculate Your Zakat-able Assets

Now, add up the value of all your zakat-able assets. This includes not just your remaining salary after essential expenses but also any savings, investments, stocks, property, and jewelry that you have owned for a Hawl (one lunar year).

If you have assets in foreign currencies, they should be converted to your local currency at the current exchange rate for an accurate calculation.

4. Deduct Your Debts

Before calculating your Zakat, you can subtract any unsettled debts or financial obligations you may have. This could include student loans, car loans, or any other debts that are yet to be paid.

Similar to Zakat on other assets, only immediate or short-term debts that are due within the lunar year should be deducted, unless advised otherwise by a religious authority.

5. Calculate Your Zakat

Finally, once you've determined your zakat-able assets, you can calculate your Zakat. Multiply the total value of these assets by 2.5% (or 0.025) to arrive at the amount of Zakat you owe.

It's advisable to consult with a religious scholar or a Zakat calculator tool to ensure you're calculating correctly, especially if you have multiple types of assets and debts.

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Conclusion:

Calculating Zakat is an essential aspect of practicing Islam for those who possess the required wealth. By following a systematic approach outlined in this guide, Muslims can fulfill their religious obligation with accuracy and peace of mind.

It is important to consult reliable sources and religious authorities to ensure compliance with specific rules and regulations governing Zakat calculation. Ultimately, paying Zakat not only fulfills a religious duty but also contributes to the welfare of society, demonstrating compassion, generosity, and solidarity within the Muslim community.