Ramadan is not far away, bringing a month of fasting during daylight hours for followers of Islam.
This ninth and most sacred month in the Islamic calendar will start on or around April 12 and last until around May 11, with Eid-al Fitr likely to fall on Wednesday, May 12.
During the holy month, Muslims across the globe will dedicate their time to reflection, self-improvement, devotion and worship during the hours they abstain from food, drink, sexual activity, smoking and other sinful activities.
One obligatory part of the Islamic faith that needs to be considered is Zakat, a type of wealth tax.
It requires Muslims to donate the equivalent of 2.5 per cent of their qualifying assets to charity to support people in need within their community. Many Muslims choose to give their Zakat during Ramadan.
Whilst Zakat – also called Zakah – is a religious obligation for Muslims each year, UK charity the National Zakat Foundation (NZF) says that three times as many people try to find out how to calculate Zakat around the time of Ramadan as at other times of the year.
How to Calculate Zakat
Working out how much Zakat you owe can be overwhelming as there are many things to consider.
You only need to pay Zakat if your overall wealth is equal to or above the wealth threshold, called the Nisab. This Nisab value can change daily, so it’s important to check the value on the day you pay your Zakat.
Many organisations have their own Zakat calculator such as this one which can make life easier – but a general guide is as follows:
- Calculate everything you own, inclusive of both money and assets
- Calculate everything you owe and deduct this amount
- Work out the balance and check it against the Nisab value
- If it is above the Nisab value, work out 2.5 per cent of this to find out your Zakat amount
Zakatable and Non-Zakatable Assets
Not all assets should be included in your Zakat calculation, but there are many that are.
The general rule of thumb is that an asset is Zakatable if you have complete ownership of it, the asset is productive, and the wealth is equivalent to the current Nisab or more.
- Business assets, such as cash owned by the business, money owed to the business for a cash loan, outstanding invoices for goods and stock, any stock or inventory owned by the business
- Investments such as stocks and shares
- Property bought with the intention to make a profit from (property to rent and property to sell)
- Gold and silver
- Any inherited money or assets that you currently have access to
- Money owed to a business for services, prepaid expenses, fixtures and fittings, property and equipment
- Property you live in with no intention to profit from
- Any other metals apart from gold and silver
- Inherited money and assets which you do not currently have access to
When Should You Pay your Zakat?
You will have a ‘Zakat due date’, which is the date that your wealth equalled or surpassed the Nisab value.
This date is also known as the Zakat anniversary and is the day on which you should pay your Zakat annually.
However, it is also encouraged to pay in advance of your specific date in order to make the most of all the spiritual benefits and blessings of Ramadan.
If you do pay early, you still need to work out how much is due on your Zakat anniversary to make sure you’ve paid the right amount.
Paying Zakat in Ramadan is not necessary, although giving charity in this month guarantees greater rewards.
The Nisab will vary each day, so it’s important to remember to check the Nisab value each year your Zakat is due, as you may not qualify for paying Zakat if your wealth becomes less than this threshold.
The National Zakat Foundation says it distributes any donated funds it receives to thousands of Muslims in need across the UK.
But you can also hand the money over to other organisations.
Green Lane Masjid and Community Centre in Birmingham also collects Zakat (or Zakah) and said: “We encourage Muslims to give locally to aid locally as per prophetic tradition. GLMCC has been holding a zakah service since 2011. The majority of this money has been given to local people in the UK..”
Others in Birmingham collecting the cash include the Zakat Foundation of India, Darul Ifta Birmingham and Ethar Relief.
Across the UK, Zakat can also be given to organisations including Islamic Relief, Islamic Aid and Transparent Hands.