What Is Zakat and Who Receives It? Nisab and Calculation

Zakat is an act of financial worship and one of the five pillars of Islam. A Muslim who reaches a certain level of wealth gives a fixed share of it to those in need. It purifies wealth and strengthens solidarity within society.

Who is obligated to pay zakat?

Zakat is obligatory upon a sane, adult, free Muslim who owns wealth above the nisab beyond basic needs. The wealth must be of a growing nature and a full lunar year (hawl) must pass over it. After deducting debts, if the remaining wealth still meets the nisab, zakat becomes due.

The nisab threshold and the rate

Nisab is the minimum amount of wealth that makes zakat obligatory, equal to about 80.18 grams of gold or its equivalent in silver, cash, or trade goods. The rate on gold, silver, money, and trade goods is one-fortieth, that is 2.5%. A person totals the value of their cash and gold and gives zakat at this rate.

Who can receive zakat?

The recipients of zakat are listed as eight categories in Surah At-Tawbah 9:60: the poor, the needy, those employed to collect it, those whose hearts are to be reconciled, freeing captives, those in debt, in the cause of Allah, and the stranded traveler. Zakat is not given to those one is already responsible for, such as parents, spouse, and children.

A simple example and what is due

For instance, a person with cash savings above the nisab, say 200,000 units, pays 5,000 as zakat at 2.5%. Zakat is due on growing wealth: gold, silver, cash, trade goods, livestock, and agricultural produce. Basic-use items such as a home, car, or personal belongings are not subject to zakat.