Important Rules Related to Zakat

Important Rules Related to Zakat

The Four Categories of Wealth Subject to Zakat

The zakat is obligatory on four categories. Some of these categories very few of our community are involved in — which is basically farming and also cattle. I'm not talking about that. If you have a question about that, come to me, I will tell you the answer for it.

But the other one is al-athman — anything of value, like currency, like gold, silver. And also the fourth one is businesses — anything for sale, anything that you sell. These are the four areas where your zakat is.

In order for the zakat to be obligatory, it has to be one of these four. So for example, I have a car — do you sell this car? No, I'm using it. So it's not obligatory, not applicable.

I have 500 grams of gold — not for use, just in my saving. In the bank, I put it as backup money, like saving dollars. In my portfolio, I have gold. There is zakat on it.

I have stocks — do you sell it? It's for sale, that's right. You can sell it. Yes, there is zakat on it.

I have a house that I'm living in — are you trading your house? Are you in a business? No, just my house, under my son's house, I have property for me and my kids. No zakat on it. Unless you are in a business of buying land and selling land — in this case, there is zakat on it.

The Second Condition: Reaching the Nisab

The first condition is that the wealth be from the amwal al-zakawiyyah. The second condition is to reach the nisab — a certain amount. If you have it on the day of your zakat, you have to give zakat.

What is that amount? Al-fuqaha, rahimahullah, debate: should we assign that amount by silver or by gold? In the old days, silver and gold for hundreds and hundreds of years — from the time of the Prophet ﷺ until today — silver and gold were almost equal to each other. The difference between the value of silver and gold was very small. But in modern days, the gap is huge.

So the nisab — the amount that you have to have in your account on the day of the zakat — according to gold, is $5,437 today. I calculated that before I came. I looked at how much 85 grams of gold is worth. That's an estimate. 85 grams of gold — that's where the zakat starts. After that, there is zakat.

And if you go by silver, which is 595 grams — if I calculate that, that's $474. See the huge gap. That's why many of the scholars said you should go by the silver. Why? Because it is better for the poor. With the gold nisab, many people will not give zakat. But in any case, whatever you take, it's up to you — both are correct.

So you consider that the threshold line: if I have in my account on the day of zakat either 85 grams of gold — which equals $5,437 — or I have 595 grams of silver — which equals $474 today — that's where my zakat applies.

I recommend that you go by the silver, which is, let's say, $470 — for today it is $474. But as you know, the price changes every day. So that also means you have to pick a day for your zakat. Say: "My zakat day is on this day." Then on that day, it's important to make your calculations. Because as you see, the price goes up and down. You have to put in some effort. I don't know how some people are so careless about this — hire someone to do it for you if you don't want to do it yourself. But you have to make the calculations to know exactly where the zakat is.

How to Calculate Your Zakat: The Pot Method

How do you give your zakat? It is simple. Imagine you have a pot — we call it wi'a' al-zakat in Arabic. This pot is where you are going to put all the things that you have to give zakat on.

I go to my account — I have cash. How much cash do I have? I have $10,000. I put it in this pot. I have 200 grams of gold or 1 kilo of gold in my savings — how much is that? Whatever, say $50,000. I put it in. So now I have $50,000 plus $10,000 cash — that's $60,000.

Then I go to stocks. I have stocks — and stocks are of two types: the stocks for your retirement, and the stocks that you sell and buy. The stocks that you actively invest in — selling and buying — or that you have a broker doing selling and buying for you: this is immediately counted. What is the value of these stocks today? The value is $100,000 — you put it in that pot on the day of the zakat.

Now merchandise. I'm a pharmacist — I count how much medicine I have, how much inventory I have in the pharmacy. My inventory — the things I will sell, but not things that are on consignment or that I do not own. I'm talking about something you own absolutely and will be selling, or something that is for sale. It doesn't matter whether you sell it or not — if it is something for sale, you calculate how much that is worth and you put it in that pot.

I'm a grocery store — how much inventory do I have? That inventory might be $100,000, $200,000, $300,000 — I put it in. I'm a doctor and I do procedures — the shots, the anesthesia, the things that I use that I charge my patients for. You take out the value of those things you sell to your patients. You are a mechanic — you have tires. You get the point.

I'm a restaurant — you put the food inventory, but not the plastic bags, not items that are not for sale. You take the merchandise and put it in the pot.

Deducting Liabilities

Now I have $100,000 or $200,000 in that pot. Before I calculate the zakat, I do the following: I am going to be making payments this month — on the day of my zakat. Let's say it is in April. I have a house payment of $10,000. I have credit cards I have to pay off — $5,000. Somebody I have to pay his debt today or this month. Insurance. Taxes. Rent. Whatever it is — you take all of this out. Minus, minus, minus, minus.

Whatever is left in that pot — that is what you give 2.5% on.

Zakat on Rental Property

Any property that you have that you rent — there is zakat on the rent. So the rent income goes into that pot on the day of the zakat. Let's say you have shops that you are renting out in a mall — the zakat does not go on the value of the property itself, but only on the money that came out of that property. That is an important point.

Zakat on Gold: The Carats Formula

Another important point: what if I have gold that I need to give zakat on? The gold that fully deserves zakat is only 24-carat gold. What if I have 21-carat or 18-carat gold? Here is a simple formula — even I can get it, and math and I do not get along very well. So if I can get it, you can get it.

You take the number of grams of gold you have — say 100 grams — and multiply it by the carats (21 or 18, depending on what you have), then divide by 24.

Formula: (Amount in grams × Carats) ÷ 24

The result gives you the equivalent pure gold amount. You then find the value of that and put it in the pot.

Zakat on Women's Jewelry

For women who wear jewelry — I do not believe there is zakat on the jewelry that women actually use. If she gives it once in her lifetime — on any amount, any new gold — she gives it one time only: the zakat on it, or an amount of money on its behalf. In this case, she will be, inshallah, on the safest side. That is the opinion of Shaykh Ibn Taymiyyah, rahimahullah, and some of the Hanbali scholars.

But if you give it annually on behalf of the jewelry, that is also the position of the Hanafi scholars and others — that you give zakat on jewelry even that which you use. But only the gold — not the diamonds, as there is no gold in that.

The Eight Categories of Zakat Recipients

Finally, when we give the zakat, there are eight categories mentioned in the Quran regarding who receives the zakat. But let me address some common questions:

Can I give my zakat to dig a well? If this well will be used by the poor only, and the majority of the people using it are poor, you can give your zakat for it — in a land that needs wells.

Can I build a hospital from my zakat? If this hospital is only for the poor, you can do that. But if this hospital treats everybody, you cannot give it your zakat. That is an important distinction.

Can I give the zakat to schools? Yes, absolutely — especially in non-Muslim countries — because that is part of protecting the identity of the Muslims, and it is one of the forms of jihad in the way of Allah.

Can I give my zakat to an organization like CAIR — one that defends the rights of Muslims? Absolutely — that is part of the jihad in the way of Allah, to support organizations that defend the rights of Muslims.

Can I give my zakat to the masjid? There are two types of masajid in this regard. There is a masjid that will take your zakat — like us at this masjid, where your zakat, when it comes, we make sure we use it for the poor, and also we use it only for supporting da'wah events — because calling to Allah and giving da'wah is part of jihad in the way of Allah. As Allah says regarding the Quran:

"And strive against them with it — a great striving."

The Importance of Taking Zakat Seriously

I know you might have a lot of other questions, but I am here every night, every day — you are welcome to ask any question. But make sure that you do your zakat correctly. Make sure that you don't just say, "whatever." Allah will ask you — and believe me, the Day of Judgment, in some sense, is harder than the IRS, harder than accounting and auditing in modern days. Allah says:

"Indeed, He has enumerated them and counted them a [full] counting."

Al-Hasan al-Basri said: Allah counted how many breaths you have taken in this dunya. So if He counted and will ask about every single breath you've taken, you can imagine what it will be like regarding your money.

(Sunan al-Tirmidhi, Hadith 2417)

"The feet of the servant will not move on the Day of Judgment until he is asked about four things — among them: his wealth, from where he earned it and on what he spent it."

But also, in another sense, it is much better — because Allah is so forgiving. But you only count on Allah's forgiveness after you have done your part. If you don't do your part, don't count on it. This is a very high risk you do not want to take.

I hope that helped you a little bit to understand the zakat and how you can give it. May Allah bless your wealth and bless what you give and what you keep.

Du'a

May Allah always keep us among those who honor the rules of Shari'ah and care for it. May Allah forgive our sins. May Allah end this Ramadan with His forgiveness. May Allah end this Ramadan with His kindness. May Allah end this Ramadan while He is pleased with us and accept all the good deeds that we do. And help us to do more in the coming days and to witness Laylatul Qadr. Allahumma ameen.

Note Regarding Eid and Jumu'ah

Eid is expected — it might fall on a Friday this year. So if Eid comes on a Friday: if you pray Eid, the Jumu'ah prayer becomes optional. That is what the Prophet ﷺ said — and when the Prophet ﷺ says something, no faqih can come and challenge it. The Prophet ﷺ was very explicit: "We pray Eid today. If you wish to pray Jumu'ah, you can. If you wish, you do not have to."

But if you do not pray Jumu'ah, what do you do? You pray Dhuhr at home. Because every day you have to pray the five daily prayers — you must pray the five daily prayers.