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The Concept of Calculating Zakah

This concept covers the processes of calculating Zakah, evaluating the amount paid for it, distributing it among its various prescribed channels and stating all these activities in accordance with the jurisprudence of Zakah.
Tasks of calculating Zakah are determined as follows:
01.
Determining, identifying and evaluating the properties liable to Zakah.
02.
Identifying, determining, and evaluating the commitments that are to be deducted from the properties liable to Zakah.
03.
Calculating the minimum amount liable to Zakah and the amount paid for it.
04.
Explaining how to distribute Zakah among its various spending channels.
05.
Showing the Zakah resources and its spending channels during a given period through the available statement and reports of Zakah.
Executive Procedures of Calculating Zakah
The executive procedures for calculating Zakah are represented in the following:
01.
Determining the end of the year, for the time at which Zakah is to be calculated. It varies according to the type of property liable to Zakah except for the Zakah due on plants, fruits, metals and natural resources. Zakah becomes due at the time of harvest or on discovering mineral and sea resources.
02.
Determining and evaluating the various types of properties owned by a given person who is asked to pay Zakah, and determining what is included in Zakah and thus called "the properties liable to Zakah", or "the Zakah funds".
03.
Determining and evaluating the commitments to be paid and deducted from the properties liable to Zakah.
04.
Deducting due commitments from properties to determine those liable to Zakah.
05.
Determining the minimum amount liable to Zakah according to the type of property or activity.
06.
Comparing the value of property stated in Article No. four to the minimum amount liable to Zakah stated in Article No. 5, to decide whether the property will be liable to Zakah or not.
07.
Determining the due quota for Zakah, which may be:
a.
2.5% as in Zakah due on gold and silver, trade, used objects, work earnings, profits and minerals, according to the opinion held by the majority of scholars.
b.
5% as in Zakah due on crops and fruits that are irrigated by tools and equipment (with irrigation costs).
c.
10% as in Zakah due on crops and fruits that are irrigated by springs and rain (without irrigation costs).
d.
20% as in Zakah due on mineral resources.
08.
Calculating Zakah by multiplying its percentage by the total amount liable to Zakah.
09.
Dividing the amount of Zakah as follows:
a.
When an enterprise is owned by individuals, the owner of the enterprise is responsible for paying the whole amount of Zakah due.
b.
When a firm is owned by partners, the amount of Zakah is divided among the partners according to their shares of the capital.
c.
When firms are founded on different sources of funding, the amount of Zakah is to be divided among the number of shares that comprise the business in order to determine the Zakah due on each share. Then, the shares of every shareholder are calculated in order to know the amount due on each one of them.
10.
Distribution of Zakah on its various channels in the light of Islamic Law.
11.
Showing and revealing the amount of Zakah and its distribution using financial reports and accounts.
The Rules of Calculating and Distributing Zakah

There are rules that govern the processes of determining, measuring, showing and revealing Zakah. These rules are deduced from sources of Islamic Law or based upon common accounting.

They include the following:
1.
The completion of a full year:
Islamic jurisprudence considers the lunar year a sufficient period for increase. Therefore, a person who is legally required to pay Zakah must calculate all his properties according to their market value after a full year elapses. In Al-Sharh Al-Saghir, there is an authentic reference to that effect:
Your assets must be evaluated every year according to their market value. The one who undertakes this process of evaluation must be just.
The above-mentioned opinion cannot be applied to Zakah due on plants, fruits, and mineral resources. The Shafi`ites, for example, said: The completion of a whole year is a condition for Zakah to be obligatory. However, completion of the year is not observed for the Zakah due upon grains, and mineral resources. The Malikis said: Completion of the year is not a condition to be observed for the Zakah due upon mineral resources and plants.
2.
Independence of fiscal years:
Based on the previous principle of the completion of the year, calculating Zakah also depends on the independence of the fiscal year. Ibn Rushd explained this by saying: If a given person spent some of his wealth before the completion of a whole year, even shortly before its close, or it was lost, no Zakah would be due on that particular amount. He must pay Zakah on the rest of the wealth if it reaches the minimum amount countable for Zakah and if the fiscal year elapses. But, if he spent some of his wealth upon which Zakah was due after completion of the year, even shortly, or it was lost by any means, he must pay Zakah on it.
3.
Real or assumed increase:
The basis of Zakah calculation relies on the increase of the property liable to Zakah whether actual or estimated regardless of whether or not the property decreased in value from the minimum amount liable to Zakah at any time in the year or that the increase was not added to the capital.
This has been clearly defined and explained by Dr. Shauqi Isma`il Shihatah: Profit is an increase in wealth that takes place during the fiscal year. Thus, whether the wealth diminishes by being converted to cash or is kept in the form of inventory by not being sold, there is a profit in both cases, as selling is nothing but converting the inventory into cash, which clearly shows the real profit.
4.
Financial ability:
The calculation of Zakah is contingent on the financial ability of the one who is required to pay Zakah, such that he should possess the minimum amount upon which Zakah then becomes due. Among the many Qur'anic verses related to this topic is: And they ask you what they should spend; say: What is superfluous. (Surah Al-Baqarah, Verse: 219) Al-Hasan Al-Basri interprets this by saying that one should not spend lavishly and squander all his property and then resort to begging. Also, this has been explained by the Prophet (peace be upon him) in saying to a man: Start with your own self and spend it on yourself, and if anything is left, it should be spent on your family, and if anything is left (after meeting the needs of the family) it should be spent on relatives, and if anything is left (after meeting the needs of the relatives), it should be spent like this; like this. And he was saying: in front of you, on your right and on your left. (Narrated by Muslim after Abu Hurairah.)
This great Islamic principle does not aim at overburdening Muslims. It also urges them to prosper. The criterion for this ability concerning Zakah calculations is one for all kinds of wealth as it is estimated up to 20 dinars or 200 Dirhams.
5.
Zakah is due upon the net revenue or the total sum according to the kind of activity concerned:
In addition to the principle of ability, Zakah is also based on the principle of deducting current debts and other costs from the revenue or wealth in general. This is in order to make it easier for those who are required to pay Zakah. Proof for this principle is easily found, such as that stated by Abu `Ubaid after others: If Zakah becomes due upon you, consider what you have in cash and other assets; then evaluate these assets in terms of money. Total what others owe you and your debts to others and deduct them from the whole amount; and then pay Zakah on what is left. The point is to distinguish debts from wealth before identifying the Zakah base or the amount of wealth upon which Zakah is due. Also, one of the earlier jurists stated that: First pay your debts, and if the rest reaches five wasqs (a kind of dry measure) then, pay its Zakah due. (Yahia bin Adam Al-Qurashi - The Book of Kharaj [Zakah] - page 59). In addition, the Messenger of Allah (peace be upon him) used to ask those who carry out the process of estimating and evaluating crops and fruits in order to determine the Zakah base to be kind and lenient with the people, as he used to say: If you were to estimate and evaluate (the fruits) you take and leave one-third, and if you did not leave one-third, then leave one-fourth. (Narrated by Ahmed)
It is evident from the previous points that the basis of Zakah calculation takes into consideration debts and costs that are necessary for earning a living, and the personal and family affairs of those who are required to pay Zakah.
6.
Totaling property:
All properties liable to Zakah are to be totaled and accounted for after determining the owner's debts. This has been confirmed by what was said by Ibn Al-Qaiym: The value of the merchandise is to be considered according to the trade prices in the countries in which these goods are found. So, if a given person sent some sort of goods to another country and it was traded before the completion of the fiscal year, its value would be counted according to the prices of that particular country. Also, one should combine the different kinds of goods and inventory in the evaluation process and offer Zakah upon all of them.
7.
Principles of evaluation according to the current rate of exchange (market value):
Islamic calculation of Zakah is based on evaluating the inventory before the end of the fiscal year in order to determine the Zakah due according to the current rate of exchange principle. Jabir bin Zaid said about inventory intended for speculation in trading: Evaluate and estimate it [your inventory] according to its market value on the day when Zakah falls due, then pay its Zakah. This was unanimously agreed upon by the majority of jurists. Maimun bin Mihran said: If Zakah falls due, consider what you have in cash and inventory, then, evaluate this inventory in terms of cash. Consider what others owe you and your debts to others and deduct all from the whole amount and then pay Zakah on what remains.

Dividing Money in Islamic Jurisprudence and its Relation to Calculating Zakah

In Islamic Jurisprudence, assets are divided into:
01.
Currency: which is exchanged in buying and selling. It consists of two kinds:
* Free money:
gold and silver.
* Bound money:
banknotes and coins.
02.
Other assets : meant to be utilized in a certain manner. They are of two kinds:
* Durable assets:
which are possessed for use in different activities e.g. machines and plow animals. This is equivalent to the modern term 'fixed assets'.
* Inventory:
which is prepared for sale and exchange, whether manufactured or bought to be exchanged in trade.
03.
Animals: camels, cows, sheep and the like. There are three kinds
* Animals raised for milk and breeding. laboring animals possessed for work.
* Animals raised for trade.
04.
Crops and fruits: the products of the land, divided into:
 
* Those irrigated by machines.
* Those irrigated by rain, springs or taking water from the earth by their roots.
 

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