Hidaya Foundation

A Brief Guide toZakat(Alms)Hidaya FoundationP.O. BOX # 5481, Santa Clara, CA 95056(866) 2.HIDAYA |www.hidaya.org

A Brief Guide toZakatWhat is Zakat (Alms)?Zakat is an obligatory act ordained by Allah,the Almighty Creator, to be performed byevery adult Muslim. Zakat is:1. An important pillar among the fivepillars of Islam.2. A form of Sadaqah (charity) which isobligatory on Muslims; it is an act ofIbadah (worship) and not a tax.3. Levied on specific assets only, identifiedby Shariah (Islamic Law) as assetshaving the potential for growth.4. The compulsory transfer of ownershipof a portion of the property of thegiver, calculated at the rate of 2.5%, topoor and needy Muslims who qualify toreceive Zakat according to the Shariah.5. Calculated according to the lunarcalendar on the market value of theZakat-able assets after deductingspecified liabilities.With regard to calculations (and specificinformation throughout this document),we have followed the opinion of theHanafi school of thought. Information onother schools of thought may be found byresearching Fiqh (Islamic jurisprudence)books, or consulting your local scholars.What is the meaning ofZakat?The literal meaning of Zakat is “to beclean, to grow, to increase.” It comesfrom the root letters za, kaf, ya, which hasseveral meanings: to be clean [Al-QuranChapter 24: Verse 21, Chapter 23: Verse4], to pay the obligatory charity [Al-Quran2:43], to be pure, innocent [Al-Quran 19:19, 18:74] to be better in purity [Al-Quran18:81, 19:13], and to praise oneself, tojustify [Al-Quran 53:32]. It has been usedin Al-Quran to mean all of these things.Why should I pay Zakat?Allah (SWT) commands in Al-Quran,“Take alms out of their property, youwould cleanse them and purify themthereby, and pray for them; surely yourprayer is a relief to them; and Allah isHearing, Knowing.” [Al-Quran 9:103]Narrated Ibn ‘Umar: Allah’s Apostle(PBUH) said: Islam is based on (thefollowing) five (principles): To testify thatnone has the right to be worshipped butAllah and Muhammad is Allah’s Apostle;to offer the (compulsory congregational)prayers dutifully and perfectly; to payZakat (i.e. alms); to perform Hajj. (i.e.Pilgrimage to Makkah), and to observefast during the month of Ramadan.(Sahih Al-Bukhari, Vol.1, Book 2, No.7).What if I don’t pay Zakat?Allah (SWT) has strongly warned thosewho are negligent in paying their Zakat.Thus He said in Al-Quran, “Those whohoard up treasures of gold and silver andspend them not in the way of Allah; givethem the news of a painful punishment,on the Day when that (wealth) will beheated in the Fire of Hell and with it willbe branded their forehead, their sides,and their backs, (and it will be said tothem:) ‘This is the treasure which youhoarded for yourselves. Now taste ofwhat you used to hoard.’” [Al-Quran 9:34-35]Further, on the authority of ‘Ali, that theProphet (PBUH) said: “Allah has enjoinedupon rich Muslims a due to be takenfrom their properties corresponding tothe needs of the poor among them.The poor will never suffer fromstarvation or lack of clothes unlessthe rich neglect their due. If they do,Allah will surely hold them accountableand punish them severely.” (related byAt-Tabarani in Al-‘Aswat and as-Saghir).

Hidaya FoundationWho Must Pay Zakat?For people to pay Zakat they must meet thefollowing criteria:1. The person should be Muslim, adult,sane, free (not a slave).2. They must possess a certain minimumamount of extra wealth (called nisab),fully owned by them, in excess of itemsof personal use (such as clothing, food,shelter, household furniture, utensils,cars, etc.)3. They should have had this minimumamount in possession for a completelunar year (hawl).4. The wealth should be of a productivenature, from which they can deriveprofit or benefit such as merchandise forbusiness, gold, silver, livestock, etc.5. The minimum amount of extra wealth (orNisab) should not be owed to someone,i.e., it should be free from debt.What About Zakat that Ihave Not Paid in the Past?Ibn ‘Abbas reported: A woman came to theMessenger of Allah (PBUH) and said: Mymother has died, and fasts of a month aredue from her. Thereupon he (PBUH) said:Don’t you see that if debt was due from her,would you not pay it? She said: Yes (I wouldpay on her behalf.) Thereupon he said: Thedebt of Allah deserves its payment morethan (the payment of anyone else) (SahihMuslim, Book 6, No. 2554).Thus, scholars deduce from the abovehadith that any missed Zakat must be paidimmediately to the deserving.When is Zakat Due?A complete year in the Islamic calendarshould pass, starting from the very day ofthe nisab’s possession, without any decreasebelow nisab during the year. In case of itsdecrease (being less than nisab), the yearcycle (hawl) starts from the day of the nisabcompletion. Zakat should be given as soon aspossible after it becomes due. It is possiblethat death may occur and thus lead to failurein fulfilling one’s obligations. If a person diesbefore paying Zakat, then it must be takenfrom his/her estate.What are the ImportantPrinciples in IdentifyingAssets Subject to Zakat?Gold, silver, cash, and other items aresubject to Zakat. Any other asset will onlybecome subject to Zakat if it was acquired orpurchased with the clear intention to resell.For example:A person buys a house which is normallyexempt from Zakat, with the intention ofreselling the house at a profit, then themarket value of the property, calculated atthe end of the relevant Zakat year, will besubject to Zakat.On the other hand, if the immovableproperty was purchased as an investment(to hold as capital) and not to resell, thenthe value of the asset is exempt from Zakat.A subsequent change of intention in thecase where the owner, who had originallypurchased the immovable property forinvestment (to hold as capital), now decidesor intends to sell it for profit will not alter thecharacter of the asset for Zakat purposesand the asset remains exempt from Zakat.What Things Require PayingZakat on Them?Gold and Silver: Asma bint Yazid reported:“My aunt and I, while wearing goldbracelets, went to the Prophet (PBUH). Heasked: ‘Did you pay their Zakat?’ She relatedthat they had not. The Prophet (PBUH)said: ‘Do you not fear that Allah will makeyou wear a bracelet of fire? Pay its Zakat.”[Narrated by Ahmad (6:461) with a goodchain, as Haythami declared in Majma` alzawa’id(3:67)]Furthermore, Aisha narrated: “TheMessenger of Allah (PBUH) came to me andsaw me wearing silver rings, whereupon, heasked: ‘What is this, Aisha?’ I replied: ‘I madethem to adorn myself for you, O Messengerof Allah.’ He said: ‘Did you pay their Zakat?’I said: ‘No, or what Allah wishes.’ Then hesaid: ‘Their punishment in Hell is enough foryou.’” (Narrated by Abu Dawud in his Sunanwith a strong chain, Daraqutni in his Sunan,and Baihaqi in his Sunan (4:140))Gold and silver, whether in the form of

jewelry or otherwise, will always be subjectto Zakat provided their respective weightsexceed the nisab amount. According toscholars, nisab for gold is 20 mithqal (~87.49g), and the nisab for silver is 200dirhams (~613.35g).Nisab Grams Ounce Troy ozGold 20 mithqal 87.49 3.086 2.8125Silver 200 dirhams 613.35 21.635 19.6875The prices of gold and silver vary everydayin international markets. On June 30, 2008,the price of gold was approximately $29.74/gand for silver was $0.55942/g, hence thenisab for gold is approximately $2,601.95($29.74 x 87.49g) and the nisab for silveris approximately $343.12 ($0.55942 x613.35g).Zakat on gold will be according to the goldcontent in the jewelry (i.e. karats) and itsvalue in the international market. Hencewhen calculating the value of your gold, youmust consult a jeweler for the correct value(depending on the content and weight).Similarly, any stones in the gold are notZakat-able.Cash: The amount of cash held, whether ina bank or personally on hand, at the end ofthe relevant Zakat year will always be subjectto Zakat. Moneys lent and advanced are, forZakat purposes, treated as cash and Zakatmust be paid on such loans each year.The Nisab for cash is equivalent to thevalue of gold or silver (whichever is less). Atpresent Nisab of silver is less, so cash may becalculated according to silver. All the values ofZakat-able assets for the sake of calculationare converted into cash, and based on thefact that nisab is calculated according to thenisab of silver, which, on June 30, 2008, was$343.12.Other items which require paying Zakatinclude:Stocks, Mutual Funds, Stock Option, EmployeeStock Purchase Plan, Business MerchandiseInventory, Private Companies, Corporationsand Partnerships, Retirement Plans (401K,IRA, etc.), Real Estate Investments inProperty Owning Companies, AccountsReceivable, Profits from Investments, Trusts,Long-Term Insurance (Life Insurance), LumpSum Payments in Terms of CompulsoryPension and Provident Funds, SeverancePackage, Income Tax, Liabilities which maybe deducted, Buried Precious Metals orMinerals (Rikaz), Livestock (including Cows,Sheep, Camels), Agricultural ProduceTo learn how to calculate Zakat for stocks,stock options and other modern day assets,visit www.hidaya.org/zakat.What things do not requirepaying Zakat on them?The money that does not reach the amountof Nisab, servants, horses, mules, donkeys,any property that is not used for businesspurposes, any products that are not ofa productive nature, even if they are inexcess of one’s needs (cars, utensils, etc.),provided they are not intended for trade anddeposits.What is the Principle ofJoinder of Acquisition inthe Same Class?The general principle is that oneyear must elapse over the Zakatableproperty in order to render itliable to Zakat. This is subject to aqualification: where a person hasNisab of a particular class of Zakatableproperty and during the courseof the Zakat year acquires propertyof the same class from any sourcewhatsoever, then the property soacquired is added to the existingZakat-able property of the same classand Zakat is payable on the whole, orthe remainder thereof, at the end ofthat Zakat year without calculating aseparate Zakat year for each suchseparate acquisition. For example,a person has cash of $5,000 andduring the course of the Zakat yearreceives a further sum of $10,000 byway of a gift. He must pay Zakat onthe sum of $15,000 at the end of thatZakat year. (See Figures 1, 2, and 3as examples.)

Who should receive Zakat?There are eight groups of people on whom Zakat should be spent, as mentioned in Al-Quran: “The alms are only for the Fuqaraa (the poor), and the Masakeen (the needy) andthose employed to collect (the funds); and to attract the hearts of those who have beeninclined (towards Islam); and to free the captives; and for those in debt; and for Allah’sCause, and for the wayfarer (a traveler who is cut off from everything); a duty imposed byAllah. And Allah is All-Knower, All-Wise.” [Al-Quran 9:60]1. Fuqaraa: Those who own property in excessof basic necessities but below the value ofNisab2. Masakeen: Persons of extreme poverty whopossess no wealth whatsoever3. Aamileen: (Zakat collector) According toScholars, those persons who are appointedby an Islamic Government to collect Zakat. Itis not necessary that this be a needy person4. Muallafatul Quloob: Those poor andneedy persons who are given Zakat with theintentions of solidifying their hearts becausethey maybe recently converted to Islam or tobring them closer to Islam5. Ar-Riqaab: slaves whose masters haveagreed to set them free on a payment of afixed amount, Zakat may be used to purchasetheir freedom6. Al-Ghaarimeen: A person whose debtsexceed his assets and his net assets (afterdeducting his liabilities) is below the Nisablimit7. Fi Sabeelillah: Those who are away fromhome in the path of Allah8. Ibnus-Sabeel: A traveler, who, whilstwealthy at his residence, is stranded and inneed of financial assistanceFigure 1In this graph, $3,000 is the amount of wealthowned in Ramadan. This amount exceedsnisab (calculated according to the nisab ofsilver.) During the year it decreases but doesnot go below nisab. In this case, Ramadan will be counted as the beginning of therelevant lunar year and Zakat will be due onthe amount of wealth in possession duringnext Ramadan, which is $6,000. Figure 2In this graph, $3,000 is the amount ofwealth owned in Ramadan. This amountexceeds nisab. During the year the amount decreases, then increases to $6,000. Then,wealth decreases again before increasingto$4,000. Despite these fluctuations, theamounts do not go below nisab. Hence, therelevant Zakat year will begin in Ramadanand Zakat will be due on the amount ofwealth in next Ramadan, which is $4,000.Figure 3In this graph, $3,000 is the amount of wealthowned in Ramadan, which exceeds nisab.During the year it fluctuates - sometimesgoing below or above nisab. The individual’srelevant lunar year however only begins oncethe wealth goes above nisab in the monthof Safar and remains above that for onecomplete year until next Safar. Hence, Zakatwill be due in Safar on the complete amount,which is $6,000.References for this information and more in depth coverage about Zakat are availableon our website: www.hidaya.org/zakatwww.hidaya.org

Hidaya FoundationOur MissionTo implement educational, socialwelfare and health care programsin economically depressed areas ofSouth Asia, West Africa and NorthAmerica, while focusing on projectswhich promote self-employment.How to Calculate your Zakat?The calculator below is based on2.5% of the total net worth that isavailable at the end of one lunar year.For a detailed Zakat Calculator visitwww.hidaya.org/zakat.Total Gold Value(without jewels)$Total Silver Value(without jewels)$Cash on hand $Checking Account $Saving Account $Business Bank Account(s) $Stocks $Mutual Funds $Business MerchandiseInventory$Retirement Plans(401K/IRA/etc.)$Real Estate (excludingpersonal residence)$Accounts Receivable $Other funds (profits, trustaccounts, partnerships, $etc.)Sub Total $Less deductable liabilitiesonly$Total $Total x 0.025 (Zakat youhave to pay)$How Hidaya Distributes ZakatHidaya Foundation collects anddistributes Zakat donations forvarious projects per Shariah (IslamicLaw) guidelines and as instructed bydonors.Zakat funds are used to supportorphans, widows, poor elderly,families in extreme poverty, poor girlsfor marriages, deserving students,medical patients and disasteraffectees.The projects where Zakat donationsare utilized are No Orphan withoutEducation, Water Hand Pump forhomes, Marriage Support for Girls,One Million Meals, Sponsor a Student,Medical Assistance, Medical Camps,and Disaster Relief.It is better for an individual to payhis/her Zakat directly to deservingpeople, if possible. If not, then theymay assign the responsibility to atrustworthy individual or organization.It is the individual’s responsibilityto ask questions from whomeverdistributes their Zakat regarding whatkind of people their Zakat is beingdistributed to, how and why theyare selected, etc. Remember, Zakatis obligatory on every Muslim and ifit is given to the wrong person, theobligation may not be fulfilled. Zakatcan only be given to people who donot have Nisab and who do meet thecriteria according to Chapter 9, Verse60 in the Holy Quran.Contact UsHidaya Foundation1765 Scott Blvd, Suite 115,Santa Clara, CA 95050(866) 244-3292, www.hidaya.org