Your Zakat Guide – what you need to know
The meaning of Zakat
Zakat is one of the five pillars of Islam and refers to almsgiving or giving a portion of one’s wealth – approximately 2.5% per cent – to charity. In Arabic, the word Zakat has numerous meanings including to purify, to profit and to increase, and refers to purifying one’s wealth for the sake of Allah SWT.
Eligibility to pay Zakat
Zakat should be paid on wealth rather than income. In simple terms, this means Zakat is calculated on an individual’s excess wealth – total savings and financial assets that are not used towards living expenses.
Muslims are required to give Zakat if there wealth is equal to or above the Nisab (threshold) – the minimum amount of wealth a Muslim must have before they become eligible to pay Zakat.
The Nisab value is calculated according to the price of gold or silver. As the price of gold and silver fluctuates daily, the Nisab value varies each year.
At GIM Foundation, we use the price of silver to determine the Nisab value and eligibility to pay Zakat. This is based on advice given by the Australian National Imams Council (ANIC) that calculating Zakat on the Silver Nisab is in the best interest of Zakat recipients.
Currently, the Silver Nisab is approximately $657.72, so any money or assets a person has above this amount is liable for Zakat.
When to pay Zakat
Zakat should be paid annually when a person has been in possession of the minimum amount of wealth (Nisab) for one whole lunar year (hawl).
While many Muslims prefer to pay their Zakat during Ramadan due to increased rewards and blessings, Zakat can be paid at any time of the year as long as the person has been in possession of excess wealth for one lunar year.
The importance of Zakat
Zakat is an act of divine worship ordained by Allah SWT, as the third pillar of Islam, and can be seen as a powerful social justice tool, redistributing wealth from those who have excess to those who are most vulnerable in society. It is a way to overcome global issues such as poverty, epidemics and hunger. While Zakat is sometimes compared to tax, similar to those imposed by governments, it is a religious duty.
The obligatory status of Zakat is based on teachings in the Qur’an and emphasised in the Prophet’s teachings, and consensus by his companions.
In Islam, Zakat is seen as a way to acknowledge that everything – including wealth – is given by Allah SWT. By giving Zakat, Muslims learn to practice self-discipline, detach themselves from their material possessions and free themselves from greed and stinginess. Paying Zakat is seen as a way to purify wealth, increase blessings and multiply spiritual rewards.
Zakat as a pillar of Islam
Zakat is mentioned along with Salah (prayer), the second pillar of Islam, in 82 verses of the Qur’an.
“True piety is this: to believe in God, and the Last Day, the Angels, the Book, and the Prophets, to give of one’s substance, however cherished, to kinsmen, and orphans, the needy, the traveler, beggars, and to ransom the slave, to perform the prayer, to pay the zakat.” (Qur’an 2:177)
The five pillars of Islam are:
- Shahadah: declaring belief in the oneness (tawhid) of God and the Prophet Muhammad (peace be upon him) as the messenger of God.
- Salah: praying the five daily prayers – at dawn (Fajr), noon (Dhuhr), mid-afternoon (Asr), sunset (Maghrib) and evening (Isha’a)
- Zakat: giving a portion of one’s wealth to a charity.
- Sawm: fasting during the holy month of Ramadan.
- Hajj: making a pilgrimage to Mecca which every Muslim must make at least once in their lifetime.
Recipients of Zakat
The Qur’an (9:60) mentions that the recipients of Zakat fall under eight categories:
- the poor
- the needy
- those who collect Zakat (charity organisations)
- those whose hearts are to be reconciled
- the emancipation of slaves or captives
- those in debt
- those in the way of God (Allah)
Find out how much Zakat you have to pay
Using our handy Zakat calculator, you can find out exactly how much you owe. Click here to calculate your Zakat now.