Zakat is one of the five core pillars of Islam and a compulsory act of worship.
It is the requirement that any Muslim who owns wealth over a certain threshold (called the Nisab) should donate a portion of that wealth (specifically 2.5%) to those who are eligible to receive zakat.
Nisab is the threshold for which a Muslim’s personal wealth must be above if he or she is to be eligible to pay Zakat.
There are two Nisab values from which the threshold is determined, which are:
• Gold – the monetary value of 87.48 grams of gold
• Silver – the monetary value of 612.36 grams of silver
Because the valuation of gold and silver fluctuates, so too does the Nisab threshold.
To be eligible to receive Zakat, the recipient must be poor and/or needy. A poor person is someone whose property, in excess of his basic requirements, does not reach the Nisab threshold.
The recipient must not belong to your immediate family; your spouse, children, parents and grandparents cannot receive your Zakat. Other relatives, however, can receive your Zakat.
The recipient must not be a Hashimi, a descendant of the Prophet (peace be upon him).
Your Zakat year begins on the date you were first in possession of wealth above the Nisab. Zakat should be calculated once every lunar year after this date.
Zakat can be pre-paid before your Zakat anniversary date. This is to encourage people to increase in worship and make the most of blessed times like Ramadan or the first ten days of Dhul Hijjah. If you pay early, you still need to work out your Zakat due on your Zakat anniversary to ensure you have paid the correct amount.
Zakat is 2.5% of your total wealth.
Zakat should be paid on wealth (rather than income) and should include the following:
• Gold and silver
• Cash held at home or in bank accounts
• Money lent to others
• Stocks and shares owned directly or through investment funds
• Pensions
• Property owned for investment purposes
• Business stock in trade and merchandise
• Agricultural produce
• Livestock animals such as cows, goats and sheep