ZAKAT IN ISLAM

Zakat is one of the main 5 pillars in Islam. Zakat means both 'purification' and 'growth'. An
individual wealth and possessions are purified by setting aside a proportion for those in
need. So the act of giving zakat means purifying one's wealth to gain Allah's blessing to
make it grow in goodness.

Zakat does not not only purifies the property, but also purifies the giver’s heart from
selfishness and greed. As for the recipient, receiving Zakat purifies their heart from envy,
jealousy, hatred and uneasiness as it will fosters instead good-will, gratefulness and warm
wishes for the contributors.

As for the society as a whole, Zakat signifies a major economic means for establishing a
more well balanced, social justice and leading the Muslim society to prosperity and
security.

Zakat is obligatory for every adult, mentally stable, free, and financially abled Muslim,
male and female.

Excerpt from Holy Quran on Zakat

" The alms are only for the poor and the needy, and those who collect them, and those
whose hearts are to be reconciled, and to free the captives and the debtors, and for the
cause of Allah, and (for) the wayfarers; a duty imposed by Allah. Allah is knower, Wise."

surah at-Taubah (9) verse 60

“ For those who believe! there are indeed many among the priests and anchorites, who in
Falsehood devour the substance of men and hinder (them) from the way of Allah. And
there are those who bury gold and silver and spend it not in the way of Allah. Announce
unto them a most grievous penalty. On the Day when heat will be produced out of that
(wealth) in the fire of Hell, and with it will be branded their foreheads, their flanks, and
their backs, their flanks, and their backs.- "This is the (treasure) which ye buried for
yourselves: taste ye, then, the (treasures) ye buried!"

Surah at-Taubah verses 34-35:

Rasulullah S.A.W mentioned :

'Charity is a necessity for every Muslim. ' He was then asked: 'What if a person has
nothing?' The Prophet replied: 'He should work with his own hands for his benefit and then
give something out of such earnings in charity.' The Companions asked: 'What if he is not
able to work?' The Prophet said: 'He should help poor and needy persons.' The
Companions further asked 'What if he cannot do even that?' The Prophet said 'He should
urge others to do good.' The Companions said 'What if he lacks that also?' The Prophet
said 'He should check himself from doing evil. That is also charity.'
Narrated by Muslim, Rasulullah S.A.W had also mentioned that :

"Any owner of gold and silver who does not deliver from them their right, on the Day of
Quiyamah (Day of Judgment), (the gold and silver) will be shaped as foils of fire. Then it
will be heated in the fire of Hell; (and) then with it he will be ironed on his side, his
forehead, and his back" .

According to Islamic law, a person who fulfilled below criteria hold the obligation to pay
Zakat :

1. A Muslim,
2. Adult, sane, free (not a slave).
3. He or she must posses a certain minimum amount of extra wealth (called nisab),
Zakat is not obligatory if the amount owned is less than this nisab. fully owned by
the person in excess of personal use.
4. The person should have had the minimum amount in possession for a complete lunar
year (hawl).
5. The wealth or profit, should be of a productive nature, from which they can derive
profit or benefit such as merchandise for business, gold, silver, livestock, etc.
6. The minimum amount (or Nisab) should not be owed to someone, i.e., it should be
free from debt.

People who are entitled to receive Zakat:

Zakat is distributed among 8 main categories of Asnaf (beneficiaries) of people, namely:

1. Fakir - One who has neither material possessions nor means of livelihood.
2. Miskin - One with insufficient means of livelihood to meet basic needs.
3. Amil - One who is appointed to collect and do the management of zakat.
4. Muallaf - One who converts to Islam with purpose to keep their faith
5. Riqab - One who wants to free himself from bondage or the shackles of slavery.
6. Gharmin - One who is in debt (money borrowed to meet basic, halal expenditure).
7. Fisabillillah - One who fights for the cause of Allah.
8. Ibnus Sabil – Travelers who are in the journey, provided that the destination of the
journey are not against the syara’.
Types of Zakat

Zakat is divided into 2 main categories that are :

1) Zakat Fitrah (obligatory)

Zakat Fitrah is an individual zakat that is obligated to each Muslims individuals, male and
female who fulfill the qualifications that had been imposed. The payment of zakat Fitrah
is usually made annually in the month of Ramadhan.

2) Zakat for Wealth and Possesions.

The types zakat for wealth and possessions are :

1. Zakat for Income and Salary,

2. Zakat for Business,
3. Zakat for Savings,
4. Zakat for Stocks,
5. Zakat for Gold and Silver,
6. Zakat for Agriculture and Poultry.

Below are the basic calculations for zakat for wealth and possessions. For more detailed
information, please refer to the state Majlis Agama Islam or Islamic Council according to
states in Malaysia in order to get the most accurate rate of nisab and calculations as
decided according to states in Malaysia.

i) ZAKAT FOR INCOME AND SALARY

Zakat for salary and income is obligatory to all kind of income or pay as return to the job
or services done by an individual. The type of income includes salary, bonus, dividence,
royalties, allowances, commissions, pensions, seasonal earning, compensations and other
form of earnings.

There are two different method of calculations or zakat in this category ;

1 ) Annual Gross Income x 2.5% (applicable if the amount exeed nisab)

E.g.: RM30,000 x 2.5% = RM 750

2) Income that is applicable for Zakat x 2.5%
(After deduction made on basic/ expenses)

E.g. : (Annual gross income – basic / allowed expenses) x 2.5%

(RM 30,000 – RM 20,400) x 2.5 % = RM 240

Please refer to the example of method for calculation as below ;

Item Amount (RM) Amount (RM)

Annual sources of Income (salary, bonus, 30,000.00

commissions etc.)
Annual basic expenses
1. personal expenses 8,000.00
2. spouse 3,000.00
3. children (2 person) (2x 2000) 4,000.00
4. KWSP (11%) 5,400.00
Total annual expenses (20,400.00)

Income that is applicable for zakat (exeeds nisab) 9,600.00

Zakat to be paid 240.00
2.5% x 9,600

ii) ZAKAT FOR BUSINESS

Zakat for business is obligatory for wealth generated from business inclusive all kind of
enterprise with intention for business including sole trader, private limited, limited
company, business partnerships between Muslims and non Muslims, cooperations etc.

The rate for ZAKAT

2.5% on the business wealth and possessions according to nisab.

METHOD FOR CALCULATION

Method 1 - Working Capital

[Current Asset - Current Liabilities]* X %Shares owned by Muslim X 2.5%

This method is usually used for companies that owned stated current asset and current
liabilities e.g. private ltd, ltd, cooperation nd enterprise

Method 2 - Working Capital

[ Owners Equity + Long term Liabilities – Fixed Asset – Semi fixed Asset]* X %
Shares owned by Muslim X 2.5%

* Applicable if it Exceed nisab

This method is usually used for financial institutions and Islamic banking which usually which
usually do not has a specific current assets and current liabilities.
iii) ZAKAT FOR MONETARY SAVINGS

Currencies and monetaries are obligatory for zakat for its value and power for purchase.
The value for currencies can be used for muamalah where the value is equally valuable as
gold and silver. The nisab for savings is based on the current value for nisab of gold (85
gram) or silver (595 gram).

The savings is considered obligatory for zakat once it reached nisab of one year and the
amount exceed the nisab which equivalent to the current value of 85 gram of gold. The
rate is 2.5% from the amount of savings.

For the savings in the account, if a person’s savings has reached one year length of time,
where its lowest balance (minus the interest during the time of savings) exeed nisab, then
the person is obligated to pay for the zakat for savings.

iv) ZAKAT FOR GOLD & SILVER

Zakat for gold and silver is obligatory once it reach its nisab and a year of haul.

METHOD OF CALCULATION

For the type of gold that are used for woman accessories on their bodies, zakat is not
obligatory if the value or weigh of the gold does nit exceed uruf (the maximum value)
The uruf is different according to states in Malaysia. For the state of Selangor, the uruf is
800 gram.

o E.g.: (The weigh of the gold x current price x 2.5%)

900 gram x RM50 = RM45000 x 2.5% = RM112

For the gold that is placed as savings or not used as accessories, whether in the form of
currencies, savings, home accessories etc. The nisab for this category of gold differs from
the gold that is used as accessories on women’s body. The gold is obligatory for zakat 2.5
% if it exceeds the nisab of 85 gram.

o E.g. : The weigh of gold x current price x 2.5%

90 gram x RM50 = RM4500 x 2.5% = RM112.50

For silver, the amount to be obligatory for zakat is calculated based on the value of the
silver regardless it’s condition whether the silver is used for accessories on body or at
home or is placed as savings. Nisab for silver is 595 gram or more

o E.g. : 800 gram silver x RM0.90( per gram) x 2.5% = RM18

v) ZAKAT FOR SHARES

Shares or stocks are investment made as a part or shares of ownership in a company or

business.

General guidance for zakat calculation is 2.5% on the lowest value of the whole shares or
stocks that is owned for a year after deducting the amount of loan made for the purchase
of the stocks (provided if the stocks are purchased by loan).

For the shares that the owner still owned until the end of haul, the zakat calculation is
2.5% based on the lowest cost / market price.

For the shares that is under the process of sale and purchase for a whole year /haul, the
calculation is 2.5% based on the selling value after purchasing cost deduction.

vi) ZAKAT FOR AGRICULTURE AND POULTRY

Zakat for agriculture is made on the agriculture produces that are the basic food for a
country once it has reached the nisab and haul. In Malaysia, the citizens basic food is rice,
so the production of paddies become obligatory for zakat.

The rate or percentage of amount to be paid for zakat is determined by the Majlis
Agama Islam or Islamic Bodies per state where the agriculture product is produced.

Zakat for poultry is obligatory once it reached the term and conditions for the owners
applicable for types of animals that are obligatoty for zakat. The types of animals are
goat, sheep, cow, buffalo and camel.
FIDYAH

Fidyah is a form of penalty given to those who is unable to qadha or replace his or her
fast due to valid reason or those who had adjourned to replace his or her fast in the first
year of Ramadhan till the next Ramadhan in the next following year.

It is obligatory for a person who does not replace his or her fast till the next following
Ramadhan to pay fidyah. However by paying fidyah, the fast still need to be replaced
according to how many days the person did not fast during the month of Ramadhan. If the
unreplaced days had exceeds the next following year, the rate of the fidyah will be
doubled.

E.g. For a day of Ramadhan where a person did not fast, the fidyah is equivalent to a
portion / cup of rice. If 2 days left, the rate become 2, if 3 days, the rate become 3. The
rate of fidyah is equivalent to unfasting days during the month of Ramadhan. However
the rate may increase, if a person do not fast for 1 day during Ramadhan, and did not
replace it till the following Ramadhan, the rate for fidyah become 2. In the third year, the
rate becomes 3 until the fast is replaced. The rate of fidyah will continues to double until
the fast is replaced.

The value of fidyah is determined based on the price of rice for the citizens of Malaysia.
According to Islamic law, fidyah has to be paid according to basic food of the local
population for a cup or a portion of approximate 650 gram.

The rate of fidyah varies according to the price determined by the respected local
authorities. For the state of Selangor, the rate for the portion of rice is RM 1.30.

The rice must be used to feed the poor, needy, and those who are qualified beneficiaries
and never to be paid as cash, clothes and other form.

If a person is unable to handover the rice directly to the qualified beneficiaries, the money
can be paid to the recognized bodies and organizations where the respected bodies will
distribute the rice to the qualified beneficiaries on the payer behalf.

A person is obligated to pay for fidyah due to below reasons ;

1. Incapable to fast due to old age, weakness, illness where fasting may worsen the
physical and health condition.

2. A person who is unable to fast due to long term / continuos illness.

3. Pregnancies or mothers who are breastfeeding her child where fasting may endanger
her child or diminishing her milk until it may affect her child.

4. Those who do not qadha / replace the fast till the next following Ramadhan without
relevant illness or 'uzur syar'i.

ZAKAT & FIDYAH THROUGH ISLAMIC RELIEF MALAYSIA

Zakat dan fidyah can be paid through Islamic Relief Malaysia. The collection will be
placed in a special fund where the collections will be distributed to the qualified asnaf or
beneficiaries according to syara’ and Islamic law.

Please feel free to inform us, if you wish to pay your zakat for any specific intention,
participation of specific program or beneficiaries from certain conflicted countries where
Islamic Relief is operated.

May Allah S.W.T bless our deeds and intentions.

Issued by Communication Unit Islamic Relief Malaysia