The word 'zakat' is usually translated as 'poor due' or 'alms tax.' Actually, no single word can translate zakat properly. Before the word zakat is explained, it is best understood with another word 'sadaqah'.
Zakat and sadaqah are different. Zakat is obligatory charity and is required, whereas sadaqah is voluntary charity and is a recommended act that brings extra reward. Moreover, zakah is the third pillar of Islam. Not paying zakat out of negligence is a sin, whereas a person is generally not sinful for not paying voluntary charity. That is why it is called "voluntary" charity! Zakat is calculated precisely and can only be given to specific recipients, whereas sadaqah is not bound by such regulations. Zakat has to be given yearly, whereas sadaqah can be given only once or as frequently as one likes.
Allah has enjoined zakat upon the faithful, making it the third pillar of Islam, and warned those who do not pay it against severe punishment. Indeed, He links brotherhood of faith with sincere repentance, offering the prayers and paying the zakat, as the Qur'an states, "Yet if they repent and establish regular prayers and pay the zakat, then they are your brothers in faith." (Soorat At-Tawbah, 9:11) The Prophet peace and blessings be upon him also said, "Islam has been built on five [pillars]: Testifying that there is no god but Allah and that Muhammad is the messenger of Allah, performing the prayers, paying the zakat, making the pilgrimage to the House, and fasting in Ramadaan.
The Ultimate Objectives of Zakat :
Allah May He be glorified and exalted has enjoined zakat on the Muslims for a number of reasons including the following:
Love of wealth is an innate human tendency, and man does whatever he possibly can to acquire it. It is for this reason that Islam requires him to pay zakat to purify his heart from selfishness and greed, as the Qur'an states, "Take zakat from their wealth to purify and cleanse them." (Soorat At-Tawbah, 9:103)
Paying zakat nurtures feelings of affection and harmony and fosters community cohesion. Because people generally have a disposition to like those who do them a good turn, members of the Muslim society become so close-knit that they resemble bricks of a building, supporting one another. Crimes such as theft and robbery tend to drop off.
Paying zakat is a vivid expression of true worship and total submission to Allah May He be glorified and exalted. When the wealthy pay zakat they actually obey Allah's commands, recognising that all prosperity ultimately comes from Allah's favour and grace. By doing so, they also show thankfulness to Him for having bestowed His blessings upon them: "If you are grateful, I will certainly give you increase." (Soorat Ibraaheem, 14:7)
By paying zakat the concept of social security and relative equality among members of society is realised. When the wealthy distribute the annual amount of zakat among the rightful beneficiaries, wealth ceases to build up in a few hands and is instead kept in constant circulation. As the Qur'an states, "This is so that they do not just circulate among those of you who are rich." (Soorat Al-Hashr, 59:7)
Spirituality of Zakat:
Zakat is a beautiful act of worship that is intimately tied to purification. As a matter of fact, spending one's wealth in zakat purifies the heart from the love of material wealth. A person who offers the gift of his wealth affirms the truth that to him nothing is dearer than the love of Allah and he is prepared to sacrifice even his wealth to please Allah. The Prophet Muhammad (peace and blessings be upon him) said,
'Whoever pays the zakat on his wealth will have its evil removed from him.'[Ibn Khuzayma and Tabarani]
Exact Definition of Zakat:
In Islamic Law (Shariah), words are clearly defined. Zakat is no exception. Shariah defines zakat to be specific portion of one's wealth that one must give yearly to a specific group of recipients that are mentioned in the Quran.
Importance of Zakat & the Punishment for Not Paying It:
Zakat represents the compassion of Islam towards the poor and needy. Zakat is not a tax, but it is an act of worship for which one receives reward from Allah. Not paying the zakat is a sin. Denying its obligation is an act of disbelief.
The Quran tells us about the fate of those who refuse to pay zakat. It says,
"...And those who hoard up gold and silver and do not spend it in the way of Allah, warn them of a painful suffering (in the life to come). On that day when (the hoarded wealth) will be heated in the fire of Hell and with it their foreheads, their sides, and their backs will be branded (and it will be said to them), 'This is the treasure which you hoarded for yourselves, so taste what you used to hoard.'" (Quran 9:34-35)
Types of Wealth upon which Zakat Is Due:
Zakat is not due on the necessities of life, such as food, drink, clothing, the house one lives in, even if it is a high-priced house, and the car one drives, even if it is a luxurious car.
It is only due on types of wealth which are not kept for immediate use and which are bound to increase, such as the following:
Gold and silver (with the exception of gold and silver ornaments used by women for their personal use)
Zakat is due on gold and silver only if their value has reached or exceeded an established minimum threshold for this particular kind of wealth (nisaab) and after one has been in possession of this for a complete lunar year (354 days).
The minimum prescribed limit on which zakat becomes obligatory (nisaab) on this type of wealth is as follows:
Zakat due on gold is approximately 85 grams and that due on silver is 595 grams.
Therefore, if a Muslim has held such an amount for a whole year, he must pay zakat at the minimum rate of two and a half per cent (2.5%).
All types of currency (banknotes and coins) held as cash in hand or bank balances
The nisaab liable to zakat on cash, banknotes and coins is to be determined according to its corresponding value of gold (85 grams of pure gold) at the time zakat falls due, based on the current rates of the country in which the payer of zakat is resident. If such currency has been held in one's possession for an entire lunar year, two and a half per cent (2.5%) of its value must be given out as zakat.
To illustrate, if one gram of pure gold at the time zakat falls due is worth, say $25, the nisaab of the currency will be as follows:
25 (price of one gram of gold, which is unstable) x85 (number of grams, which is stable)= $2125 is the minimum exemption limit (nisaab).
It is worth noting that estimating the nisaab liable to zakat on banknotes, coins and commercial commodities is generally based on their corresponding minimum amount of gold, since the value of gold is more stable than any other kind of property.
This term stands for all properties owned with the aim of investing them in trade. They generally include assets, such as real property, and commodities, such as consumer goods and foodstuffs.
The value of commercial assets, which have been held in one's possession for an entire lunar year, must be estimated according to the current market value on the day zakat falls due. If the commercial commodities reach the nisaab,two and a half per cent (2.5%) of their value must be given out as zakat.
The Qur'an states, "O you who believe, give away some of the good things you have earned and some of what We have produced for you from the earth." (Soorat Al-Baqarah, 2:267)
Zakat is due only on certain types of agricultural produce on condition zakat able produce has reached the minimum amount on which zakaat is due (nisaab)
In consideration of people's different circumstances, the amount of zakat payable on farm produce varies according to costs spent and effort exerted in irrigation.
Livestock: Zakat is due on livestock, such as cows, camels and sheep, only if the animals graze on pasture and the owner does not take a lot of trouble to supply them with fodder.
If he supplies them with fodder all or most of the year, zakat is not due on them.
Details as to the minimum amount upon which zakaat is due (nisaab)on livestock are available in books on Islamic jurisprudence (fiqh)
Who Can Receive Zakat?
The Quran tells us who is entitled to receive zakat. The eight categories are found in the Quran in Chapter at-Tawbah, 9:60:
1. The Poor
Poor people who do not have sufficient money to meet their needs are qualified to receive zakat. It does not mean they are penniless, but cannot make their ends meet, yet they do not ask others for help out of modesty and a sense of self-respect.
2. The Destitute
These are people who are so poor that they have nothing to meet their needs. Obviously, they are in worse condition that the first category.
3. Zakat Administrators
People responsible for collecting and distributing zakat could be paid for their work from zakat funds. They can receive wages whether they are poor or not.
4. Reconcile Hearts
People who have recently accepted Islam can be given zakat. People can also be given money from zakat to seek their support or to prevent their opposition.
5. Freeing Slaves
In the past, zakat money was also used to buy slaves their freedom. The Quran has legislated it to be one of the legitimate ways to spend the money from zakat. It is a clear expression of the compassion of Islam towards treatment of slaves when they existed. Islam raised freeing slaves to an act of worship pleasing to God. No other religion has ever done that as far as this author is aware of.
6. Paying Debts
People who are overburdened with debt and do not have a way to pay on their own can also receive zakat funds. The debt can be due to medical reasons, marriage, or other lawful expenses.
7. Cause of Allah
Wealth can also be spent in the cause of Allah. The traditional understanding held by the classical scholars of Islam is that this category is reserved for jihad or a legitimate war. Later scholars have included efforts for the spread and ideological defense of Islam in this category as well.
People used to get stranded in the past while traveling with no access to their funds back home. It happens sometimes today as well. In such situations, those travelers may be given money from zakat. The condition is that their journey should not be in disobedience of Allah, but for an acceptable cause like seeking knowledge, looking for a job, or doing business.
Who Can Not Receive Zakat?
A wealthy person cannot give zakat to his or her parents because they are the child's responsibility. Also, a husband cannot give zakat to his wife as she is his financial responsibility. Furthermore, a non-Muslim cannot be given zakat according to the majority of scholars. Poor non-Muslims can be helped with sadaqah or voluntary charity.
Practical Tips on Giving Zakat
1. You can give money to a poor and needy Muslims directly if you know them.
2. Your local Islamic center most likely collects zakat and distributes it to the needy of the local community or works with a charitable organization. Therefore, you can always ask the local mosque if they accept zakat. You might even find boxes labeled "zakat" in the mosque in which you can simply drop your check or cash for zakat.
3. Furthermore, you can search online and find numerous Islamic charitable organization that collect zakat to sponsor orphans or distribute food or medicine in disaster-struck areas.
Zakat is to be paid on gold and silver jewelry. The zakat on the gold will be calculated according to the gold content in the jewelry (i.e. karats) and its value in the market. Hence when calculating the value of your gold, you must consult a jeweler for the correct value (based on the content and weight). Any stones in the jewelry are not subject to zakat.
You must have the intention to pay zakat when you give it out. In other words, you cannot give money in donation, then later think to yourself, 'well, I have given so much in charity already, it will count as my zakat!'
Zakat must be paid immediately once it is due. It should not be delayed unless there is a good reason to do so, like waiting to have access to the poor.
A very common and widespread misunderstanding is that once I have paid zakat on some wealth, I do not have to pay zakat on the same wealth next year. That is baseless. In reality, as long as I have wealth above the nisaab, and a complete lunar year has passed on it, I will keep paying zakat on it every year.