How to Calculate Zakat
Zakat calculations are overwhelming. But don’t worry, we have you covered.
One of the most common questions we receive at Human Concern International is how exactly do I calculate my Zakat? In this blog, we will break it down for you in 4 easy steps.
For your convenience, we have a Zakat calculator ready to go.
Zakat: Getting Started
Some quick facts and terms to know:
- Zakat is due on an annual basis when a morally responsible Muslim possesses the minimal amount of wealth, known as the Nisab.
- Nisab: Is the minimum amount of wealth possessed required to give Zakat.
- Zakat is 2.5% of your wealth that you possess over one lunar year (assuming you have the minimal amount – Nisab).
- Zakat can be paid at ANY point during the lunar year, so long as you’re consistent. Many choose to give their Zakat during Ramadan, simply for the extra blessings, and it is easy to remember! The key is to be consistent on that date.
- Income that is used to pay for essential needs such as bills, house payments/rent is not used in the calculation.
- Zakat is based on one lunar year and not the Gregorian (solar) year.
Do I Meet The Requirements To Pay Zakat?
Muslims who have more than the minimum amount are eligible to give Zakat. Zakat is 2.5% of your assets after removing debts and immediate expenses.
To understand how much to give, one first needs to know the minimum amount of wealth needed in order to first give Zakat. This is called the Nisab, which acts as a threshold amount to determine if you need to pay Zakat or not. If your wealth is higher than the Nisab threshold, then you need to pay Zakat. If your wealth is under this threshold, then you are not obligated to pay.
The Nisab standard was set by the Beloved Prophet Muhammad (PBUH) at a rate equivalent to 87.48 grams of gold and 612.36 grams of silver. This means that the amount slightly fluctuates each year according to the value of gold and silver. Check our Zakat Calculator for the current Nisab amount to confirm your eligibility.
Example: Fatima has accumulated $17,000 in savings and assets for one lunar year after meeting the Nisab threshold. Generally speaking, she would need to pay the 2.5% on the $17,000 amount.
Example: In a difficult year, Fatima has $230 in her savings after all essential expenses and no additional assets. In this case, she would not be required to pay Zakat.
Zakat being the third pillar of Islam, it is only obligitaory if you meet the requirements. God says in the Quran “God tasks no soul beyond its capacity.” (2:286)
If you qualify, proceed to step 2.
What are My Zakatable Assets?
Once you know the minimum amount needed. It is time to find out how much Zakat you owe. This starts with understanding what your savings and assets are. Assets are considered wealth in various forms, including:
- Cash – currency or bank accounts, income from rental properties
- Trade goods such as stocks
- Gold and silver jewellery
- Agricultural produce
- Money lent out to others
Your assets are based on how much you have from the beginning of a lunar year to its exact end. So how exactly can I calculate my assets if they’re always changing during the year? Your official calculated amount will be done on the day your Zakat is due.
Example: If Fatima has $32,000 in her possession (which qualifies her over the Nisab amount) at the beginning of the lunar year, and by the end, she has $41,000, then she will calculate her Zakatable amount based on the $41,000.
Remove Any Debts
After determining your savings and assets after one lunar year, the zakatable amount of wealth is determined after removing any liabilities you may have. This can be (but not limited to):
- Short-term debts
- Long-term debts
- Monthly expenses (rent/mortgage payments, utilities, personal and living expenses)
Remove the liabilities from your assets:
Zakatable amount = assets over one lunar year – liabilities
Example: Fatima has $21,000 in assets and $4000 in debts. Her Zakatable amount is $21,000-$4,000 = $17,000.
Calculating Your Zakat Owing
You must donate 2.5% of your Zakatable amount of wealth to fulfill your obligation.
Example: Fatima has calculated her Zakatable amount over one lunar year to be $17,000.
Her Zakat is 2.5% of $17,000.
$17,000 x 0.025 = $425.
Fatima owes $425.
Did you know that Zakat can be paid in installments assuming no undue delays? Our beautiful religion of Islam allows for ease to ensure we can fulfill our obligation and support our Ummah.
Always check with your local Imam for specific questions, or reach out to us for additional help.