How do you calculate Zakat?

[srh]

Ramadan is around the corner and people usually pay Zakat in this month. One thing I am not clear about is how to calculate Zakat.

Do you note down your bank balance 1st day of last Ramadan then subtract it from your bank balance 1st day of this Ramadan and pay 2.5% of the difference as Zakat?

Is this the correct way? I am not sure.

 

[PCP_1]

https://www.muslimaid.org/zakat-calculator/

 

[srh]

https://www.muslimaid.org/zakat-calculator/

your link says: Net savings is total maintained wealth for one lunar year before Zakat is due.

Lets take an example to clear my question:

Suppose there is a person who is working on a monthly salary and each month he is saving 1000$. Suppose his bank balance on the 1st day of last Ramadan (after paying Zakat) was 10,000$. So these would be his bank balances after last Ramadan:

1. After Month: Shawwāl ; Bank Balance: 11,000$
2. After Month: Dhū al-Qa‘dah ; Bank Balance: 12,000$
3. After Month: Dhū al-Ḥijjah ; Bank Balance: 13,000$
4. After Month: Muḥarram ; Bank Balance: 14,000$
5. After Month: Ṣafar ; Bank Balance: 15,000$
6. After Month: Rabī‘ al-Awwal ; Bank Balance: 16,000$
7. After Month: Rabī‘ ath-Thānī ; Bank Balance: 17,000$
8. After Month: Jumādá al-Ūlá ; Bank Balance: 18,000$
9. After Month: Jumādá ath-Thāniyah ; Bank Balance: 19,000$
10. After Month: Rajab ; Bank Balance: 20,000$
11. After Month: Sha‘bān ; Bank Balance: 21,000$

So now should he calculate Zakat on the bank balance at the 1st day of coming Ramadan and which is 21,000$?

 

[Zed_mann]

The way I calculate it
Pay £25 for every £1000, you have at that time

 

[godzilla]

i was told that this site can pretty much answer any question on this topic:

http://www.nzf.org.uk

 

[srh]

i was told that this site can pretty much answer any question on this topic:

http://www.nzf.org.uk

awesome link. Thanks.

My question is related to paying Zakat on cash.

From that website:

Wealth that you have had in your possession for a full lunar year is called a Hawl.

Paying Zakat on your salary can become a bit laborious, but in this section we summarise the 3 main approaches you can take to make Zakat payment and calculation as easy as possible:

Procedure 1: Consider each month to have a Hawl
Keep track of the savings from the income you get each month; consider each month to have a Hawl of its own. You would then need to pay Zakat from the money that you had saved each month over the course of the year. This is a very complex method

Procedure 2: Estimate the money coming in and pay Zakat immediately
Pay Zakat on the estimated money that you expect to save every month – i.e. as soon as the money comes in, you take your Zakat straight out.

Procedure 3: assign one Hawl to the salary
Consider the Hawl of the salary to be one and the same since the income every month is in the same currency and type of wealth. This is the most popular and preferred opinion.

So this is my example:

1. After Month: Shawwāl ; Bank Balance: 11,000$
2. After Month: Dhū al-Qa‘dah ; Bank Balance: 12,000$
3. After Month: Dhū al-Ḥijjah ; Bank Balance: 13,000$
4. After Month: Muḥarram ; Bank Balance: 14,000$
5. After Month: Ṣafar ; Bank Balance: 15,000$
6. After Month: Rabī‘ al-Awwal ; Bank Balance: 16,000$
7. After Month: Rabī‘ ath-Thānī ; Bank Balance: 17,000$
8. After Month: Jumādá al-Ūlá ; Bank Balance: 18,000$
9. After Month: Jumādá ath-Thāniyah ; Bank Balance: 19,000$
10. After Month: Rajab ; Bank Balance: 20,000$
11. After Month: Sha‘bān ; Bank Balance: 21,000$

So for my example what will be Zakat in each of the 3 procedures the website mentioned?

 

[godzilla]

perhaps you could send them a question on the site - they might be a good bet to get a well researched answer as opposed to a guess from a random message board contributor.

 

[bones]

I've done a lot of research on this topic over the years and spoken to many people and it's still up for debate. But for me the answer was given on Islam QA's website with the following statement.

1 – That it reaches the nisaab (minimum threshold)
2 – That one year has passed since it reaches the nisaab.

The above statements clearly mean you have reached the minimum threshold so you owe zakat and you owe it because of the $10000 at the start.

Your zakat based on the sources I've read and reliable sources not the charities because their calculators do not consider bullet point 2, your zakat will be based on $10000 so it will be $250.

The banks in Muslim countries also use this method. They calculate it on all the wealth you have had for at least 1 lunar year. Now your zakat in 2016 will be based on the $21000 figure.

I used to overpay and all these online calculators are to blame because they don't address the key point that you have to have owned that wealth for at least a year. Now I know what the actual Islamic rules on zakat are, I won't be makign the same mistake again and neither should you.

 

[bones]

The way I calculate it
Pay £25 for every £1000, you have at that time

That is wrong, you should paying £25 for every £1000 that you have owned for at least one lunar year. So you should be paying on what your balance was at the time you paid your last zakat.

 

[bones]

Here is another quote from IslamQA that should make it absolutely clear.

"If it reaches the nisaab, and one year has passed, i.e. a lunar (hijri) year has passed since the time when it reached the nisaab, then zakaah becomes due at that point."

One lunar year must have passed. So again srh, your 2015 Zakat is based on $10000 (250) and your 2016 one will be based on $21000, even if your balance in 2016 is $31000.

 

[bones]

srh,

I pay my zakat on the 20th of Ramadan every year. So my calculations for this year's zakat is based on how much was in all of my bank accounts on the 20th of Ramadan 2014. I use a calendar converter and my bank statements to calculate this. My wealth has increased since then, but this will only be a factor in 2016.

If you pay for your wife's zakat, on maybe her gold for example. It is not compulsory by the way, women should know this but they choose ignore this fact, they must pay it, but if you choose to pay for her zakat it is a great blessing and you'll be rewarded for it. You also pay it based on how much she has owned for at least a year. So for example of you gave your wife a gold ring as a gift 2 months ago, that is not included.

There is a common misconception amongst Pakistanis, well some that I know, that you exclude the base nisaab value from the zakat calculation, there is nothing I've read which confirms this. So as I include the nisaab value and not just what's on top of it.

 

[Zed_mann]

That is wrong, you should paying £25 for every £1000 that you have owned for at least one lunar year. So you should be paying on what your balance was at the time you paid your last zakat.

Thanks for the reply bones

Let assume my balance of last zakat was £10,000, after one year it became £20,000, would zakat be compulsory on the £20,000, of the difference, which would be £10,000

 

[bones]

Thanks for the reply bones

Let assume my balance of last zakat was £10,000, after one year it became £20,000, would zakat be compulsory on the £20,000, of the difference, which would be £10,000

Not sure how to put it but let's say the follow is the case.

Ramadan 2014: Balance = £10000
Ramadan 2015: Balance = £20000

You are paying zakat on £10000, not because it's the difference but because it was the balance last year. So for example:

Ramadan 2014: Balance = £10000
Ramadan 2015: Balance = £20000
Ramadan 2016: Balance = £24750

In Ramadan 2016 you would pay zakat on the £20000. In 2017 on £24750 etc.

This is of course assuming you pay zakat every Ramadan, some people pay every Shaban, some every Muharram. But many pay in Ramadan.

 

[Zed_mann]

Not sure how to put it but let's say the follow is the case.

Ramadan 2014: Balance = £10000
Ramadan 2015: Balance = £20000

You are paying zakat on £10000, not because it's the difference but because it was the balance last year. So for example:

Ramadan 2014: Balance = £10000
Ramadan 2015: Balance = £20000
Ramadan 2016: Balance = £24750

In Ramadan 2016 you would pay zakat on the £20000. In 2017 on £24750 etc.

This is of course assuming you pay zakat every Ramadan, some people pay every Shaban, some every Muharram. But many pay in Ramadan.

Thanks for the detailed reply,

 

[srh]

Here is another quote from IslamQA that should make it absolutely clear.

"If it reaches the nisaab, and one year has passed, i.e. a lunar (hijri) year has passed since the time when it reached the nisaab, then zakaah becomes due at that point."

One lunar year must have passed. So again srh, your 2015 Zakat is based on $10000 (250) and your 2016 one will be based on $21000, even if your balance in 2016 is $31000.

I've done a lot of research on this topic over the years and spoken to many people and it's still up for debate. But for me the answer was given on Islam QA's website with the following statement.

1 – That it reaches the nisaab (minimum threshold)
2 – That one year has passed since it reaches the nisaab.

The above statements clearly mean you have reached the minimum threshold so you owe zakat and you owe it because of the $10000 at the start.

Your zakat based on the sources I've read and reliable sources not the charities because their calculators do not consider bullet point 2, your zakat will be based on $10000 so it will be $250.

The banks in Muslim countries also use this method. They calculate it on all the wealth you have had for at least 1 lunar year. Now your zakat in 2016 will be based on the $21000 figure.

I used to overpay and all these online calculators are to blame because they don't address the key point that you have to have owned that wealth for at least a year. Now I know what the actual Islamic rules on zakat are, I won't be makign the same mistake again and neither should you.

Not sure how to put it but let's say the follow is the case.

Ramadan 2014: Balance = £10000
Ramadan 2015: Balance = £20000

You are paying zakat on £10000, not because it's the difference but because it was the balance last year. So for example:

Ramadan 2014: Balance = £10000
Ramadan 2015: Balance = £20000
Ramadan 2016: Balance = £24750

In Ramadan 2016 you would pay zakat on the £20000. In 2017 on £24750 etc.

This is of course assuming you pay zakat every Ramadan, some people pay every Shaban, some every Muharram. But many pay in Ramadan.

Thanks [MENTION=135003]bones[/MENTION].

This is how I have been calculating Zakat on Cash in bank: On Ramadan 1 each year, see what is the balance of my bank account and calculate 2.5% of it as Zakat. So if I have $10,000 on Ramadan 1 then I would calculate $250 as Zakat.

Whoever I ask they say just do it using the online Zakat calculators and those calculators do it same way: calculate 2.5% of your bank balance on the date when you are calculating Zakat.

But I thought I was doing it incorrectly and I am glad you pointed it out.

Another example:

* Last Year (2014) Ramadan started on June 29, 2014 and at that time his bank balance was $5,016.78.
* This Year (2015) Ramadan started on June 18, 2015 and at that time his bank balance was $16,764.60.

So the Zakat for 2015 Ramadan should be calculated as 2.5% of $5,016.78 which will be $125.42. Right?
And the Zakat for 2016 Ramadan should be calculated as 2.5% of $16,764.60 which will be $419.12. Right?
[MENTION=3393]godzilla[/MENTION] [MENTION=139087]PCP_1[/MENTION] [MENTION=47691]Zed_mann[/MENTION] do you guys agree?

Gonna invite some respected users in here too
[MENTION=253]the Great Khan[/MENTION] [MENTION=22846]Nostalgic[/MENTION] [MENTION=17315]Stewie[/MENTION]

 

[MenInG]

The government on Monday set the 'nisab for Zakat' at Rs46,329 for the current year, a statement from the State Bank of Pakistan read.

"No deduction of Zakat at source shall be made [...] in case the amount standing to the credit of an account is less than Rs46,329 on the first day of Ramzan ul Mubarak, 1141 AH," read the statement.

"First day of Ramzan has already been notified as the deduction date likely to fall on April 24 or 25, 2020 (subject to appearance of the moon) for deduction of Zakat from Saving Bank Accounts, Profit and Loss Sharing Accounts and other similar Accounts having credit balance cf Rs.46,329.00," the statement read.

To be liable for Zakat – which is one of the five pillars of Islam – one's wealth must amount to more than a threshold figure, termed the ‘Nisab’.

"All the Zakat Collection Controlling Agencies (ZCCAs) are requested to deduct the Zakat accordingly," it read

https://www.geo.tv/latest/283979-sbp-sets-zakat-nisab-at-rs46329-for-2020

 

[mon858]

Ramadan is around the corner and people usually pay Zakat in this month. One thing I am not clear about is how to calculate Zakat.

Do you note down your bank balance 1st day of last Ramadan then subtract it from your bank balance 1st day of this Ramadan and pay 2.5% of the difference as Zakat?

Is this the correct way? I am not sure.

In Hanafi Fiqh, which is what most Indian/Pakistani origin people follow, you would check the amount of zakatable assets (bank account being one of them) on your annual day of zakat and take 2.5% of it as your zakat, which you can then take out of your funds and set aside.
your annual day of zakat is technically the islamic calendar date which is one year after the first time you acquired more than Nisaab amount of wealth (typically can be 1 year from your first paycheck or second/third depending on your income level, etc.). you can technically change it to being a day in ramadan for ease/reminder purpose but paying forward in advance one time for that gap from that first year day to 1st of ramadan. (e.g. your actual nisaab date was 1st shaaban, you can pay the extra to cover that 1 month one time and then from then on keep calculating on 1st ramadan as your nisaab day).

you dont need to worry about any money addition/reduction during the year, you just look at the amount you have on the nisaab day every year.

here is a simple reference guide to follow: http://masjidds.org/wp-content/uploads/ZakatSheet.pdf

that same organization above is planning on a zakat webinar on May 3rd Sunday that you can attend if you want. there are various reference books also available on it.

 

[gazza619]

I think it is also a matter of personal judgement for some people. Like if someone wants to pay 2.5% of their wages rather than savings than good on them.

I would actually say that the more important question is who do you pay Zakat.

In my view it would be absolutely criminal if your zakat money travelled around the world however you had someone in your family circle who was more entitled to it.

 

[sweep_shot]

I generally use online zakat calculator from any well-reputable Islamic website.

 

[sweep_shot]

I used this calculator to pay my zakat this year: https://www.islamicreliefcanada.org/what-we-do/zakat/zakat-calculator/.

Islamic Relief Canada is a well-reputable and registered charity based in Burlington, Ontario, Canada.

 

[shaz619]

[MENTION=135003]bones[/MENTION] So paying it on this time last years monthly balance in the current and savings account ? or is it just the current account ? what if the savings were for like a deposit etc I suppose that doesn't make a difference or discount that amount ? thanks

 

[mon858]

Thanks [MENTION=135003]bones[/MENTION].

This is how I have been calculating Zakat on Cash in bank: On Ramadan 1 each year, see what is the balance of my bank account and calculate 2.5% of it as Zakat. So if I have $10,000 on Ramadan 1 then I would calculate $250 as Zakat.

Whoever I ask they say just do it using the online Zakat calculators and those calculators do it same way: calculate 2.5% of your bank balance on the date when you are calculating Zakat.

But I thought I was doing it incorrectly and I am glad you pointed it out.

Another example:

* Last Year (2014) Ramadan started on June 29, 2014 and at that time his bank balance was $5,016.78.
* This Year (2015) Ramadan started on June 18, 2015 and at that time his bank balance was $16,764.60.

So the Zakat for 2015 Ramadan should be calculated as 2.5% of $5,016.78 which will be $125.42. Right?
And the Zakat for 2016 Ramadan should be calculated as 2.5% of $16,764.60 which will be $419.12. Right?

[MENTION=3393]godzilla[/MENTION] [MENTION=139087]PCP_1[/MENTION] [MENTION=47691]Zed_mann[/MENTION] do you guys agree?

Gonna invite some respected users in here too
[MENTION=253]the Great Khan[/MENTION] [MENTION=22846]Nostalgic[/MENTION] [MENTION=17315]Stewie[/MENTION]

agree with your assessment and calculation above.

 

[bones]

[MENTION=135003]bones[/MENTION] So paying it on this time last years monthly balance in the current and savings account ? or is it just the current account ? what if the savings were for like a deposit etc I suppose that doesn't make a difference or discount that amount ? thanks

Correct - you pay zakat on the amount of wealth you had exactly 12 months ago. Any wealth that you have had for 12 months, you pay zakat on that.

I will give you a rough example to work with.

Ramadan 2019:
All bank balance after paying zakat = £5,000
All gold/silver in possession = £5,000
Total amount to pay Zakat on = £10,000
Therefore you pay £250 this year provided you still have more than the nisaab. Current Nisaab is £3,800 approximately.

These are examples so just apply the same rules, if you have had more than £3,800 for 12 months or whatever the equivalent in your currency - you must pay zakat.

 

[Theo_14]

Correct - you pay zakat on the amount of wealth you had exactly 12 months ago. Any wealth that you have had for 12 months, you pay zakat on that.

I will give you a rough example to work with.

Ramadan 2019:
All bank balance after paying zakat = £5,000
All gold/silver in possession = £5,000
Total amount to pay Zakat on = £10,000
Therefore you pay £250 this year provided you still have more than the nisaab. Current Nisaab is £3,800 approximately.

These are examples so just apply the same rules, if you have had more than £3,800 for 12 months or whatever the equivalent in your currency - you must pay zakat.

What source is backing this?

From my research and conversations with many people. Zakat is calculated on amount of savings you currently have.

 

[in_cutter]

What source is backing this?

From my research and conversations with many people. Zakat is calculated on amount of savings you currently have.

This is correct. Doesn’t matter what you had 12 months ago...never heard of that before. Basically £25 of every £1000 in your bank + gold depending on price of it in weight as of now.

 

[PakPremi]

That is illogical as zakat is due on savings held for a year. So if say one month before ramdhan you suddenly earned 5k, surely you dont pay 2.5% on that too as you only held it for one month.

 

[bones]

What source is backing this?

From my research and conversations with many people. Zakat is calculated on amount of savings you currently have.

Well I had to do a lot of reading on this topic, but perhaps these posts best summarise it.

https://islamqa.info/en/answers/93414/zakaah-on-wealth-earned-during-the-year
https://islamqa.info/en/answers/50801/how-should-he-pay-zakaah-on-savings-that-are-not-permanent

1. You must have more than the nisaab value
2. A lunar year must have passed whilst this wealth is in your possession

Please refer to those links. There are others too but they are difficult to find because like your communications with other people, most take it as the wealth currently in your posession, when that is false. It is that which is in your posession that you have held for at least one Hijri (lunar calendar) year.

 

[bones]

This is correct. Doesn’t matter what you had 12 months ago...never heard of that before. Basically £25 of every £1000 in your bank + gold depending on price of it in weight as of now.

You are incorrect.

Please refer to the Islam QA links I have attached in my previous post. The reason why you have never heard it before is because like me many years ago, I didn't know the actual rules until someone sat down to explain to me how it works.

Zakat is due on a person who has more than the Nissab value in wealth and he has held it for a lunar year.

Take for example someone who has nothing then all of a sudden 2 pay packets arrive they push him over the current nissab value (approx £3850), zakat is not due for him because he hasn't held it for a Lunar year.

Apply the same principal to other scenarios and you soon realise why you should take the figure from a year ago.

 

[bones]

One other point - there is nothing wrong with paying zakat on what you have right now, but it would be considered paying Zakat in advance because a lunar year hasn't passed. However we should all remember Zakat is welfare contribution and is not meant to put burden on people.

 

[saeedhk]

The passing of a lunar year is confusing. It is difficult to track what amount you have had for a year. Basically, pay 2.5% of whatever you have now.

 

[bones]

The passing of a lunar year is confusing. It is difficult to track what amount you have had for a year. Basically, pay 2.5% of whatever you have now.

It’s not confusing in the slightest nor is it difficult to track. Please don’t encourage people to place unnecessary burden on themselves as that is not what zakat is for.

The rules are very simple once you get the hang of it. Tracking it is not difficult either because everyone can access statements online at the click of a button.

 

[Greenstorm]

One other point - there is nothing wrong with paying zakat on what you have right now, but it would be considered paying Zakat in advance because a lunar year hasn't passed. However we should all remember Zakat is welfare contribution and is not meant to put burden on people.

Why is it lunar year ? Is it wrong to use Gregorian calendar ?

 

[bones]

Why is it lunar year ? Is it wrong to use Gregorian calendar ?

I can’t really answer the question on why other than say it is what has been prescribed to us as Muslims. All references in Hadith are to the Hijra (lunar) year.For zakat we must use the lunar year.

 

[Syed1]

(Current bank balance + market value of investments - short term debt ) *0.025

Calcs for wife's jewellery is harder

Use any of the hundreds of Zakaat calculators online

 

[in_cutter]

(Current bank balance + market value of investments - short term debt ) *0.025

Calcs for wife's jewellery is harder

Use any of the hundreds of Zakaat calculators online

This is how we have been doing it for yrs...never heard of the lunar yr thing.

 

[bones]

This is how we have been doing it for yrs...never heard of the lunar yr thing.

Again - have you read those IslamQA links I posted?

Just because you have been doing it for years doesn’t make it the correct thing. You say you have never heard of the lunar year thing and yet it is one of the most important points to consider when doing your calculations.

You can pay on your current wealth - it is considered advanced zakat but it is not compulsory.

 

[bones]

(Current bank balance + market value of investments - short term debt ) * 0.025

Tell me what happen in the following scenario.

Nisaab based on gold = £3860
Month 0 total wealth = £2000
Month 11 total wealth = £2000
Month 12 total wealth = £5000

Does the person pay zakat?

Using your incorrect and incomplete statement above yes they pay zakat. In reality based on authentic Hadith and Islamic fatwas no the person does not because a lunar year has not passed since the persons wealth was above the nisaab value.

 

[PakPremi]

I agree with bones. It would be absurd to think that you would pay zakat on amount that you may have held for just a month.

 

[Syed1]

Tell me what happen in the following scenario.

Nisaab based on gold = £3860
Month 0 total wealth = £2000
Month 11 total wealth = £2000
Month 12 total wealth = £5000

Does the person pay zakat?

Using your incorrect and incomplete statement above yes they pay zakat. In reality based on authentic Hadith and Islamic fatwas no the person does not because a lunar year has not passed since the persons wealth was above the nisaab value.

First of all I'm no Islamic expert and you are unnecessarily complicating things. If you feel paying Zakat at the end of month 12 is unfair then you can compute it based on your wealth at the end of month 11, but make sure next year you also use the same month (month 11) for Zakat calculation.

 

[bones]

First of all I'm no Islamic expert and you are unnecessarily complicating things. If you feel paying Zakat at the end of month 12 is unfair then you can compute it based on your wealth at the end of month 11, but make sure next year you also use the same month (month 11) for Zakat calculation.

You like many completely miss the point and that’s the problem.

Nisaab based on gold = £3860
Month 0 total wealth = £2000
Month 11 total wealth = £2000
Month 12 total wealth = £5000

In the example I gave above, the person doesn’t have to pay any zakat. However month 12 is when Nisaab is reached and this is where the lunar year begins. Month 24 (Hijri calendar) is when the person is due to pay Zakat on £5000.

What you and the charity websites are suggesting is that zakat is due on £5000 in month 12. It’s not and there’s no dispute on this.

The charities – who profit from people’s zakat completely ignore the point about a Hijri year passing, I wonder why.

 

[PakPremi]

They ignore so they can gain extra zakat.

 

[MenInG]

Timely reminder.

 

[shaz619]

Timely reminder.

This thread is so handy and especially the posts from [MENTION=135003]bones[/MENTION] , read them every year to work out what I need to pay.

I normally use some links to help those in need we know off in Pakistan but I got a bit late this year and used penny appeal, not sure how authentic they are but hoping iA they make good use off the Zakat

 

[MenInG]

This thread is so handy and especially the posts from [MENTION=135003]bones[/MENTION] , read them every year to work out what I need to pay.

I normally use some links to help those in need we know off in Pakistan but I got a bit late this year and used penny appeal, not sure how authentic they are but hoping iA they make good use off the Zakat

I feel donating to people you know who can improve their lives is a more rewarding way to do this

 

[shaz619]

I feel donating to people you know who can improve their lives is a more rewarding way to do this

Yes, this is the best way.

 

[bones]

Everyone must remember the two key points and they will be fine.

1. The person must pay zakat if his/her wealth is above the Nisaab value (minimum value which is approximately £4600 in 2023).
2. A lunar year (Islamic year) must have passed since acquiring the wealth.

Once these two conditions are met then you pay 1/40th (2.5%) of the amount. Zakat is compulsory on us but it is not designed to place burden on us. Islamqa has many fatwas on this topic such as 93414 please refer to them if you want more details.

 

[MenInG]

Everyone must remember the two key points and they will be fine.

1. The person must pay zakat if his/her wealth is above the Nisaab value (minimum value which is approximately £4600 in 2023).
2. A lunar year (Islamic year) must have passed since acquiring the wealth.

Once these two conditions are met then you pay 1/40th (2.5%) of the amount. Zakat is compulsory on us but it is not designed to place burden on us. Islamqa has many fatwas on this topic such as 93414 please refer to them if you want more details.

Jazak Allah Khair for your advice.