How to Pay Zakat
The topic of this talk is an important pillar of Islam which is Zakat, and the purpose is that people learn about the importance of Zakat, how important it is to pay it, and Shariah’s rules about it so that people can pay Zakat properly. For that reason, I have recited two verse of the Holy Quran in front of you in which Allah Ta’alah has given a stark waring to those people who do not pay Zakat. The first verse says; “…As for those who accumulate gold and silver and do not spend it in the way of Allah, give them the ‘good’ news of a painful punishment,”(9:34) In the next verse Allah Ta’alah has described the detail of this punishment as; “on the day it (the wealth) will be heated up in the fire of Jahannam, then their foreheads and their sides and their backs shall be branded with it: ‘This is what you had accumulated for yourselves. So, taste what you have been accumulating’.” (9:35) May Allah Ta’alah keep every Muslim safe from this punishment. Ameen Allah Ta’alah has described the punishment for those who keep accumulating their wealth and do not give even obligatory charity, in other verses too. In Surah al-Humaza Allah Ta’alah says; “Woe to every backbiter, derider, who accumulates wealth and counts it.He thinks that his wealth has made him eternal.Never! He will certainly be thrown into the Crushing Fire.”(104:1-4)
Where Does our Earning Come from?
Why is there such a stark warning for not paying Zakat? We need to think about where does our earning come from, whether we earn it through business, through employment, or through farming. Did we have the power by ourselves to earn that income? If we did, why do so many people who work equally as hard are unable to earn the same amount? It is the system set up by Allah Ta’alah that provides sustenance to everyone through it.
The Distribution of Jobs is from Allah Ta’alah
It is the system set up by Allah Ta’alah which sends customers to a shop. Was there ever a conference organized in which it was decided that so many people will sell rice, so many will sell clothes, and so many will sell shoes? No such conference has ever been organized, rather it is Allah Ta’alah who put it in someone’s mind to sell shoes, someone’s mind to sell meat, and someone’s mind to sell clothes, so that everyone’s needs can be met. Then Allah Ta’alah put the thought in buyers’ minds to go and buy these items from these people, to provide them with their sustenance. Such is the system set up by Allah Ta’alah which is providing income to everyone.
Who Grows the Crops from Earth
All a farmer can do is to plant the seeds and water them. But that seed grows into a sapling, which is extremely delicate but pierces hard soil to come out. It then braves the hot or cold weather, braves the wind, and then grows into a plant. That plant then grows fruits or vegetables which in some cases travel to the four corners of the world. Is there a human being who can guarantee when he puts the seeds in that this whole process will happen successfully? It is only Allah Ta’alah who can make that delicate seed into a fully grown plant, tree or a crop.
Everything Belongs to Allah Ta’alah
Human beings can make limited effort only. They cannot create anything. For example, they can put the seeds in but have no control whether the crop will grow or not. It is Allah Ta’alah who creates things and then grants them to human beings. Whatever we have actually belongs to Allah Ta’alah. In the Holy Quran Allah Ta’alah says; ( ما في سمٰوت وما في الارض: ( ۲:۲۸۴ “To Allah belongs what is in the heavens and what is in the earth.” (2:284)
Everything We Have is a Blessing from Allah Ta’alah
And after granting all these material possessions to us Allah Ta’alah declared that we were the owners of these things too. In Surah al-Yaseen Allah Ta’alah says; “Did they not see that We have created for them cattle, among things made (directly) by Our hands, and then they become their owners?” (36:71) This verse reminds us that whatever we have, has been granted to us by Allah Ta’alah. And when it has been granted to us by Allah Ta’alah then we should spend it the way Allah Ta’alah wants us to spend it. If we spend from it as per Allah Ta’alah’s commandments, then the remaining capital will become Halal and pure for us, it will become a blessing for us. And if we do not spend from it as Allah Ta’alah has commanded us to do, then, on the Day of Judgment, all this wealth will be heated up and we will be branded with it, and we will be reminded that this is the wealth you used to accumulate in your worldly life.
Only Two and a Half Percent
If we truly believe that whatever wealth we have has been granted to us by Allah Ta’alah, then if Allah Ta’alah had ordered us to keep two and a half percent of it, and give 97.% percent of it away in Allah Ta’alah’s way, it would have not been unfair since it all belongs to Allah Ta’alah anyway.However, Allah Ta’alah has shown kindness to His subjects because of our natural attraction towards wealth and told us that as long as we spend 2.5 % of it in Allah Ta’alah’s way, the rest of the 97.5 % is Halal and pure for us and will be a source of blessing for us.
Quranic Commandment about Zakat
In the Holy Quran Allah Ta’alah has said multiple times; الزکٰوة واقیمو الصلٰوة وا “Establish Salah and Pay Zakat.” When Allah Ta’alah has commanded us so many times to pay Zakat, and, on the other hand, Allah Ta’alah has showered such great blessings upon us that He has granted us all the wealth we have, then made us owner of that wealth, and then told us to give only 2.5 % of it with others, then we should also make an effort to take out 2.5 % of our wealth carefully.
Zakat Should Be Calculated Carefully
In a Hadith, the Holy Prophet صلى الله عليه وسلم said that if Zakat gets mixed with a person’s wealth (meaning that they didn’t calculate their Zakat properly, and therefore didn’t pay all that was due) then that wealth becomes a source of great harm for them. That is why Zakat should be calculated and given very carefully. Alhamdulillah most Muslims take out Zakat but some are not diligent in calculating it and pay an approximate amount. If they pay more than what was due, then InshaAllah they will be fine,but if they pay less, then that unpaid Zakat will contaminate their entire wealth.
The Worldly Benefits of Zakat
Zakat should be paid primarily because it is one of the commandments of Allah Ta’alah, and is an act of worship (Ibadah). Whether we get any material benefit because of extracting Zakat or not, is not the point. The primary purpose is to obey Allah Ta’alah, and to try to please Him. However, it is Allah Ta’alah’s kindness when a person takes out Zakat from their wealth, Allah Ta’alah showers them with material blessings as well. In the Holy Quran Allah Ta’alah says; (۲۷۶ : بِﯩٱلصَََّدق ت ( ۲ رُاو ۡ ل هَُِّٱَْٰلَّ يمَُحقٱ “Allah destroys riba and nourishes charities…” (2:276) In a Hadith, the Holy Prophet صلى الله عليه وسلم said that when a person takes out Zakat then Allah Ta’alah’s angels make this prayer in his favour; “O’ Allah! Give even more to the person who is spending in Your way, and destroy the wealth of the person who is holding his wealth back and not paying Zakat.” (Bukhari, Chapter on Zakat) In another Hadith, the Holy Prophet صلى الله عليه وسلم said; مال ما نقصت صدقة “Sadaqah does not lead to reduction in wealth”. It happens that as soon as a person takes out Zakat from their assets, Allah Ta’alah creates other sources of income for them and they get more earning than the Zakat they had paid. Sometimes it happens that after taking out Zakat a person’s wealth goes down in numbers, but Allah Ta’alah creates such blessing (Barakah) in the remaining assets that it suffices for more of their needs.
The Meaning of Barakah (Blessing)
These days our worldly success or failure is measured in numbers. The person who earns more in numbers is presumed to be more successful than the person who earns less. People do not understand the meaning of Barakah (blessing). Barakah means that a little amount suffices for a lot of benefit. For example, a person earned a lot of income. However, his son fell ill. He then had to take his son to the hospital for expensive treatment and he ended up spending more than they had earned. It means that there was no Barakah in his income. There are many other situations in which people who earn a lot, lose money one way or the other. It means that what they are earning is not being spent on benefitting them, or making them happy. Barakah means that a person may earn a small amount but that small amount is sufficient to cover a lot of his needs and wants. Allah Ta’alah grants this Barakah to those who obey Him. That is why we should take out Zakat by calculating it exactly as advised by Allah Ta’alah and the Holy Prophet صلى الله عليه وسلم, and not by casual guesswork.
The ‘Nisa’ab’ of Zakat
Allah Ta’alah has specified that Zakat becomes compulsory (Fard) for a person only if they have assets up to a certain value in their possession. This amount is known as the ‘Nisa’ab’ of Zakat. If someone possesses less than this Nisa’ab, then it will not be Fard (compulsory) upon them to pay Zakat. The Nisa’ab of Zakat includes; 52.5 Taula (a measure of weight) of silver, or its equivalent of cash, jewelry, or items of trade. A person who has this much wealth in their possession is known as “Sahib-e-Nisa’ab”.
Zakat is Paid on the Amount in Possession on the Date of Zakat
Suppose a person had 100,000 rupees in their account on the 1st of Ramadan when they first became Sahib-e-Nisa’ab. Next year, they come into possession of Rupees 50,000 two days before Ramadan, so that on the next 1st of Ramadan there are Rupees 150,000 in their account. They will then have to pay Zakat on the total amount of Rupees 150,000. Now if someone argues that because the Rupees 50,000 had come into their possession only two days before Ramadan and that amount had not been in their possession for the whole year, therefore, they shouldn’t have to pay Zakat on those 50,000, that argument would not be correct. Zakat is payable on the amount a person has in their possession on the date of the anniversary of when they first became Sahib-e-Nisa’ab. This is applicable in reverse too. For example, a person spends 50,000 out of the Rupees 100,000 in their account a few days before the anniversary of their first becoming Sahib-e-Nisa’ab. In that case, they only have to pay Zakat on the Rupees 50,000 in his possession on the anniversary date. There is no need to keep a track of how much they earned or spent in the intervening year and do not have to calculate Zakat on that amount.
What Kind of Assets is Zakat Payable on?
It is Allah Ta’alah’s blessing upon us that He has not made Zakat Fard (compulsory) on every form of wealth and assets we have, but only on some of them. Zakat is Fard on the following types of assets; (1) Money, in any form, whether it is paper money or coins, and (2) Gold and Silver, whether it is in the form of jewelry, or coins or bars. Some people think that Zakat is not payable on jewelry that is in regular use by women. This is incorrect. Zakat is compulsory on jewelry regardless of whether it is in regular use or not, as long as it is made of gold or silver. If the jewelry is made of another metal beside gold and silver, for example platinum, Zakat is not compulsory on that jewelry. Similarly, Zakat in not compulsory on diamonds or other valuable stones, as long they are in personal use, and are not intended to be used for business purposes.
Zakat is an Ibadah (Act of Worship)
Here it is important to understand that Zakat is an Ibadah (act of worship). This is one of Allah’s commandments. Thesedays sometimes people try to rationalize and argue why Zakat is payable on one thing and not the other. For example, why is Zakat compulsory on gold and silver, but not on platinum? Asking this question is the same as asking that if during travel the Fard (compulsory) raka’at of Zuhur and Asr are shortened from four to two, then why do we still have to pray three raka’at Maghrib? Why is that not shortened to two as well? Or if someone asks that why does someone have to pray a shortened Salah when travelling in first class in an aeroplane when they don’t get any tiredness, but I have to pray full Salah when travelling with great difficulty in public transport? The answer to all these questions is the same; that these are Allah’s commandments and we have to obey them exactly as prescribed by Allah Ta’alah. Otherwise, they would become following our opinions, and would stop being Ibadah.
Ibadah are Commandments of Allah Ta’alah
Similarly, someone might ask why is it that the Hajj can only be performed on the 9th of Dhul-Hijjah? Why can’t I go to Arafat today? If someone does that and even if they stay there for three days rather than one, even then their Hajj would not be accepted. This is because Hajj is an Ibadah(act of worship) and an Ibadah can only be accepted if it is performed the way Allah Ta’alah has commanded us to do it. The same principle applies to every other Ibadah.
Zakat on Trading Stock
The other category of assets Zakat is compulsory on is trading stock a person owns for the purpose of selling for business. For example, Zakat is compulsory on the whole stock a person keeps in their shop for sale. However, there are three ways that stock’s price can be calculated. The first is retail price, the second is wholesale price, and the third is the price the stock would fetch if the whole stock is sold together as lump sum. Forthe purpose of calculating Zakat it is permissible to calculate the value of the stock as if it as being sold as lump sum, and then two and a half percent of that value being paid as Zakat. However, it is more prudent to pay Zakat according to the wholesale price.
What is Included in Trading Stock?
In addition to the above, every asset that a person acquires with an intent of selling it for profit, is included in trading stock. For example, if a person buys a piece of land, or acar, or a house, with an intention that they will later sell it for profit, then all of these would be considered trading stock and the person would need to pay Zakat on it. There are many people who buy land for investment with an intention from the beginning that they will sell it once its price goes up sufficiently. Zakat would be compulsory on the value of that land. However, if someone buys land thinking that they might build a house on it for living there, or rent it out, orsell it, they do not buy it with a clear intention of selling it, then it that case Zakat will not be compulsory on that land. Similarly,if a person buys land with an intention of building a house to live on it, but later on changes their mind, and wants to sell it, even in that case Zakat does not become compulsory at the time of the change of intention, and will not become compulsory until theperson has actually sold the house and come in possession of its price.
Price on The Day Of Calculating Zakat
Zakat must be calculated on the basis of the price of an asset on the anniversary date of Zakat. For example, a person bought a piece of land for Rupees 100,000. It increases in value and on the day on which Zakat is being calculated its price is 1 million rupees. In that case Zakat will be paid as 2.5 % of 1 million rupees, and not as 2.5 % of 100,000.
Zakat on Shares of Companies
Similarly, shares of companies are also included in trade stock though are two scenarios. The first is that a person buys shares of a company with the intention that they will keep getting annual dividend (profit) of that company. The second scenario is that a person buys shares of acompany for Capital Gains, which means that their intention from the beginning was that once the price of those shares went up they would sell them to make profit. In this second scenario Zakat would be payable on the full market value of those shares on the anniversary date of Zakat. For example, a person bought shares of a company at a rate of Rupees 50 per share with the intention of selling them when their price went up. When the date of their calculating Zakat came, the price of the shares had gone up to Rupees 60 per share. They will then have to pay Zakat as 2.5 % of the total value of their shares at Rupees 60 per share. Other than shares, all other financial instruments like bonds or certificates come under the category of cash for Zakat purposes. Zakat is payable on their full value.
Zakat on Loans Given
Sometimes a person has given a loan to other people. When a person is calculating Zakat, it is better to include those loans in one’s assets and pay Zakat on them. The actual ruling of Shariah is that Zakat becomes due on loans only after the person who had loaned the money has received it back. However, they then will have to pay Zakat for all the previous years during which those loans were due. It may be easier to understand it with an example. Suppose a person had loaned Rupees 100,000to someone. They received that amount back 5 years later. During those 5 years they wasn’t required to pay Zakat on those Rupees 100,000 but once they receive their capital back, they would be required to pay Zakat on that amount for the previous 5 years as well. Because it is usually difficult for people to pay Zakat for 5 years in one go, it is better to keep paying Zakat against that loan every year.
Pay Zakat to the Deserving
Shariah has set clear rules about who Zakat can be given to. Hazrat Mufti Muhammad Shafi RE used to say that Allah Ta’alah has not said, ‘take out Zakat’, Allah Ta’alah has said, ‘give Zakat’. It suggests that it is also the responsibility of the person giving Zakat to make sure that it gets to the right person as prescribed by the Shariah. A number of Muslims today take out Zakat but are not careful in ensuring that it gets to those deserving of it under the rules of Shariah.
Who is deserving of Zakat?
Shariah has decreed that Zakat can only be given to those poor people who are not Sahib-e-Nisab themselves. If a person has assets in their possession which are in excess of their daily needs, and the cost of those assets is more than the price of 52.5 Taula (a measure of weight) of silver, then that person is not eligible to receive Zakat.
Give Zakat to Deserving Relatives
This commandment of paying Zakat, rather than merely taking it out, motivates a person to find people who are truly deserving of Zakat and pay it to them. It is our responsibility to find out who amongst our neighbours, our acquaintances, our family members, our friends and relatives, is deserving of Zakat as per Shariah’s rules, and pay our Zakat to them. Giving Zakat to one’s relatives brings the greatest reward among all the categories above because it carries double thawab (merit), the first of paying Zakat and the second of doing Silah Rehmi (fulfilling the rights of one’s relatives).
Which Relatives Zakat Can’t Be Given To
Zakat can be given to all relatives except in two kinds of relationships. The first relationship in which Zakat cannot be given is between parents and children, so children can’t give Zakat to their parents, and parents can’t give Zakat to their children. The other relationship in which Zakat cannot be given is that of Nikah (marriage), so the husband cannot Zakat to his wife and the wife cannot give her Zakat to her husband. Otherthan these two relations, Zakat can be given to every other relative, for example, to brothers, sisters, aunts, uncles, nephews, nieces, etc, as long as they are not Sahib-e-Nisab and are deserving of Zakat. May Allah Ta’alah help us follow all these commandments.
وَ اٰخِرُ دَعْوٰىهُمْ اَنِ الْحَمْدُ لِلّٰهِ رَبِّ الْعٰلَمِیْنَ۠