Business, Know your finances, Online Magazine

Clean Your Finances With Zakat

1

By Sahrish Ali

In terms of meaning, the word Zakat is taken as “purification” and “growth.” In the light of Islamic teachings it is defined as an act, made obligatory upon every eligible Muslim, in which he or she has to give a calculated amount of his/her wealth to less fortunate people. who have been described by the teachings of the Holy Qur’an and hadith.

The teachings of the Holy Qur’an and hadith classify the people on whom Zakat should be spent, into eight groups:

“The alms are only for the Fuqara’ (the poor), and Al Masakin (the needy) and those employed to collect (the funds); and to attract the hearts of those who have been inclined (towards Islam); and to free the captives; and for those in debt; and for Allah’s Cause, and for the wayfarer (a traveler who is cut off from everything); a duty imposed by Allah. And Allah is All-Knower, All-Wise.” [Al Quran 9:60]

Zakat is obligatory on these kinds of wealth

  1. Gold and Silver (or their equivalents in modern currencies)
  2. Tradable assets owned by one’s business
  3. Grains, grapes and dates
  4. Freely-grazing livestock and cattle

If a person’s wealth exceeds the nisaab, then they must pay zakat on their total wealth. Nisaab is equivalent to the monetary value of 85 grams of gold or 595 grams of silver. Since the nisaab value constantly changes, it should be checked and calculated before paying zakat.

Photo Credit: ajanshaber.com

Photo Credit: ajanshaber.com

There are two kinds of zakat

Zakat on wealth
Which differs from Zakat Al Fitr. Whoever pays zakat on wealth is not relieved of paying Zakat Al Fitr and vice versa.

Zakat on businesses
Steps you should follow while paying zakat for your business:

  1. Take your current savings, all cash in hand, any tradable business inventory you own, and the value of any active investments and marketable securities you have and add them together.
  2. Deduce any immediate liabilities such as your bills, payroll, insurance payments, etc.
  3. Subtract your immediate liabilities from your current assets.
  4. The following equation may be useful to conveniently get the percentage of zakat: The amount of zakat = the value of goods in hand + cash assets + recoverable debts – debts x 2.5 percent.

The Department of Zakat and Income Tax (DZIT) is a government agency that reports to Ministry of Finance. It was established as per Ministerial Resolution no. 394, dated 7/8/1370 H. (14/06/1951).

Photo Credit: plus.google.com

Photo Credit: plus.google.com

Grants

If the money you have is in the form of a grant from the government, the easiest way for you, with regards to paying zakat, is to wait until one hijri year has passed, then check your bank and pay 2.5 percent (25 out of every thousand) from whatever you have. In case you are living hand to mouth, as it were (i.e., spending it all straightaway), and you do not have enough left to reach the level of the nisaab, and a year has passed, then you are not obliged to pay zakat.

Keep in mind

• Zakat cannot be paid for building, repairing or renovation of mosques.
• The money from zakat cannot be used to pay the outstanding debts of a person who died. If paid, such action will be considered invalid. Whoever dies and owes zakat, his heirs must pay it from his wealth, and that takes precedence over the will and inheritance.
• No zakat is due on houses, cars or buildings that a person owns, unless one intends to trade in them.
• By reducing wealth confinement the Zakat system makes sure the circulation of wealth in society is fair.

You Might Also Like

[fbcomments]

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>