Zakat, one of the Five Pillars of Islam, is a form of alms-giving and a religious obligation for those who can afford it. It is a set percentage (2.5%) of accumulated wealth over a year, given to aid the poor and needy1. In Hanafi Islam, the rules for Zakat are specific and detailed.
Zakat is compulsory on the following assets1:
Gold and Silver: All forms of gold and silver, jewelry that contains 50% or more gold and silver content, gold and silver coins, gold and silver ornaments, utensils, etc. Zakat is compulsory on these items whether these are in use or not.
Cash: Petty cash, float, cash on hand, cash at the bank, foreign currency, saved income from rental/property investments, dividends from investments, lump sum payouts, etc.
Stock in Trade: Stock, raw materials, redundant stock, assets purchased with the intention of resale. The market-rated value of the stock will be considered.
Receivables: Debtors, loans, deposits (municipal, rental), insurance, voluntary pension/provident funds, retirement annuities, etc.
Shares/Unit Trusts/Partnership: The net Zakatable assets of the company/fund/partnership will be considered and Zakat is payable pro rata of one’s investment/shareholding.
Livestock: Livestock such as goats, sheep, cows, bulls, and camels for breeding purposes. Livestock for trade purposes is treated as stock in trade.
The following assets are not subject to Zakat:
- Metals other than gold and silver such as platinum, titanium, etc.
- Property, Land, and Building
- Household effects, fixtures, and fittings
- Motor vehicles
- Personal effects (that are not gold/silver)
- Diamonds, pearls, and other precious or semi-precious stones
If any of the above assets are purchased for resale then these shall be regarded as stock in trade and calculated as Zakatable assets.
