Zakat Explained: Who Pays, How Much and On What

Who must pay zakat?

Every adult, sane Muslim (and, according to the majority, the property of children is also subject to zakat, paid by the guardian) who owns wealth reaching the nisab, held for one full lunar year (hawl), after deducting debts that are due.

The nisab and the rate

The nisab is the value of 85 grams of gold or 595 grams of silver. Once reached, zakat is 2.5% (a fortieth) of the zakatable wealth. Because the price of silver is much lower, its nisab is reached sooner; many institutions use it for the benefit of the poor, others prefer gold for money.

Assets subject to zakat

• Cash and bank balances, including savings accounts.
• Gold and silver, including investment gold; worn jewellery is subject to zakat in the Hanafi school only.
• Shares and funds: at market value for trading, or on the zakatable assets of the company for long-term holdings, according to many scholars.
• Business stock at its sale value, plus receivables.
• Livestock and agricultural produce have their own rules (for crops: 10% or 5% at harvest).

What is not subject to zakat

The home one lives in, the car, furniture, clothes, tools and machinery of work. Property bought to rent out is not subject to zakat on its value, only on the rental income saved; property bought for resale is business stock.

Paying zakat

Zakat is paid when the lunar year is complete; it may be paid in advance. Choose a fixed date, such as the 1st of Ramadan, to calculate it each year. Our zakat calculator helps you work out the amount.

Gold jewellery, business stock and shares

Goods held for sale are valued at their current selling price on the zakat date. Gold and silver held as savings or investment are always zakatable. For jewellery worn by women, the Hanafi school requires zakat while the majority exempt jewellery in normal use; paying it is the more cautious choice.

Shares bought for trading are valued at their market price. For shares held for long-term dividends, many scholars require zakat only on the share of the company’s zakatable assets; when that figure is unknown, 2.5% of the market value is a safe estimate.

In brief

• Zakat is due on savings above the nisab held for a lunar year.
• The nisab is 85 g of gold or 595 g of silver.
• The rate is 2.5% of zakatable wealth.
• Homes, cars and personal belongings are exempt.
• Choose a fixed annual date and pay without delay.

Read next

• Who Can Receive Zakat? The Eight CategoriesThe eight categories of zakat recipients named in the Qur’an (9:60), explained, plus who may not receive zakat, such as one’s parents, children and spouse.
• The Five Pillars of Islam ExplainedWhat are the five pillars of Islam? The testimony of faith, prayer, zakat, fasting in Ramadan and Hajj, with their meaning, conditions and evidence.