A Simple Guide to Calculate Your Zakat

Highlights of the post:
Eligibility criteria
Nisab to choose
Zakat calculator
Net worth of Zakat
Rate
Distribution
Zakat deduction
FAQs

Ramadan is truly the month of giving and receiving and there’s no better way to prove it than paying Zakat. It is an Islamic form of charity that needs to be given once every lunar year with respect to all the possessions [such as cash, gold, silver, property, and any other asset] you have. Calculating your Zakat, however, might be a little tricky since it involves a few complications. And, we are here to help you figure it out. 

Before we get into further details. Please note that the values we have mentioned in this post are in alignment with Pakistani currency (PKR), and silver and gold rates in Pakistan. 

Let’s begin!

Stepwise Guide to Calculate Your Zakat in 2021 

As mentioned earlier, Zakat – the third pillar of Islam – is a form of charity to give back to the community and the ones in need, in order to not only purify your wealth but also your soul. It is compulsory for every eligible and practising Muslim.

There is a certain criterion one needs to follow for giving Zakat. You need to make sure you are Sahib-e-Nisab [eligible to pay Zakat] and ascertain how much you are required to give. 

Eligibility Criteria for Paying Zakat in Pakistan

As paying Zakat is quite a big responsibility, it is not made compulsory on every individual, which makes it quite confusing for everyone, and leaves you with the question “Am I eligible to pay Zakat as per the Nisab?”

Let us clear this confusion for you. You become Sahib-e-Nisab if the value of your assets is more than the following for a complete full year.

• Gold of:

• 7.5 tola
• 3 ounces
• 87.48 grams

• Silver of:
  
• 52.5 tola
• 21 ounces
• 612.36 grams

While calculating Zakat money in Pakistani rupees, all you need to do is multiply one of the above-mentioned weights of either gold or silver with their respective current rates. This method will give you the value in terms of the Zakat Nisab in Pakistan you wish to pay, which leads one to think “Which Nisab should I choose?”

Nisab to Choose

The silver nisab is considered as Afzal or superior, as more Zakat is given due to lower value. This is beneficial for both, the one who gives and the one who receives. If your savings and assets are in gold, you should probably choose the gold nisab, but if your assets are mixed, gold, cash, silver and other goods –  you should choose the silver nisab.

On a side note, with the holy here, follow this Ramadan shopping list to save yourself from multiple trips to the supermarkets. 

Zakat Calculator 

Now that you know about your eligibility and nisab – the questions that arise are: ‘How to calculate Zakat?’ and ‘Which assets need to be included and which liabilities to exclude?’

Assets to be included

The first thing one needs to keep in mind while calculating Zakat is that you are not entitled to pay it on the items that are used in your daily routine, but on your savings and assets that are in excess such as:

• Cash – if it’s saved at home or in a bank. Foreign currency would be valued at the current local conversion rate
• Savings that are kept for a specific purpose, for example, travel (even Hajj & Umrah), buying an asset, marriage, etc
• Any property owned, that is not being used currently
• Profit to be earned from any near future transaction
• The market value of any share that you own, and would be selling in the near future
• Dividend received from the owned shares if you would not be selling them in the near future
• If anyone owes you money and will be returning the amount to you, then you are applicable to pay zakat on that amount
• Value of gold and silver in the local currency
• For the business owners, you are required to include the balance sheet value of the stocks owned
• For the owners of a rental property, you need to include any saved rental income as well

On a side note, if you have any confusion between Zakat tax and property tax, check out our recent post. 

Liabilities to be Excluded

Every single penny you own and is not in constant use is applicable for Zakat. Under this logic, the amount of money that you might owe someone does not need to be included in Zakat.

The below-mentioned liabilities are to be excluded from the Zakat money:

• The amount owed to your landlord
• If you have given your property on rent, the amount equivalent to the value of the property is applicable for Zakat
• If you owe an amount, that you need to pay to your employees as their salary
• If you have taken any loan or mortgage, the amount owed would also be excluded from Zakat
• The number of pending utility bills will also be excluded from the Zakat money.

Net Worth of Zakat

The net worth of Zakat is the number of assets that you own and is applicable for Zakat. While there are many online Zakat calculators, to be certain of the amount you are giving, you can do it yourself.

The calculation for that is pretty simple:

Calculate the total amount of Zakat assets and Zakat liabilities. Subtract the two amounts and you have the net worth of Zakat.

Let’s assume you have the following assets and liabilities:

Zakat Assets

Cash = PKR 350,000

Gold/ Silver = PKR 200,000

Dividend (will be received in the future) = PKR 150,000

Total Zakat Assets in PKR = 350,000 + 200,000 + 150,000

Total Zakat Assets = PKR 700,000

Zakat Liabilities

Pending Utility Bills = PKR 100,000

Loan = PKR 130,000

Value of Rented Property = PKR 120,000

Total Zakat Liabilities in PKR = 100,000 + 130,000 + 120,000

Total Zakat liabilities = PKR 350,000

Net Worth of Zakat = Zakat Assets – Zakat Liabilities

Net Worth of Zakat = 700,000 – 350,000

Net Worth of Zakat = PKR 350,000

Rate of Zakat

Now that you have calculated the net worth of Zakat, you need to figure out the amount you need to pay for Zakat. For that, you need to multiply the net worth of Zakat by the rate of Zakat. Whether you are paying zakat on gold or silver.

The rate of Zakat is 2.5% or the 40^th portion of your net worth of Zakat. All there is left to do is simply multiply the rate with the net worth of Zakat.

Zakat to be paid this year

PKR 350,000 * 2.5% = PKR 8,750 

PKR 350,000/40 = PKR 8,750

The rate of Zakat is the least amount of Zakat that a Sahib-e- Nisab has to pay. However, there is no limitation on the maximum amount of Zakat one wishes to pay. 

Distribution of Zakat

Now that the tricky part of our guide on calculate your Zakat is done. You now have to figure out how to distribute the Zakat and who is eligible to receive it. There are two ways to pay Zakat, you can pay it in one single go or by installments until the next Islamic year.

Even though Zakat is for the needy individuals of the society, you can only pay it to an individual falling in one of the eight categories mentioned in the Quran.

Masarif-e-Zakat (Recipients of Zakat)

Let us list down the individuals eligible to receive the Zakat:

• Fuqara : The poor and low-income individuals
• Masakeen: The needy Muslims who have insufficient basic facilities
• Aamileen: Individuals responsible for the collection of Zakat by the Islamic state
• Muallafat-ul-Quloob: Individuals who have recently converted to Islam, and lack basic necessities. This is done to make increase the love of Islam in their minds. 
• Ar-Riqaab: Given to slaves and captives, to help set them free.
• Al-Gharimeen: Muslims in debt
• Fi Sabeelillah: Muslims who are away from home and are in need.
• Ibn-us-Sabeel: A traveler who is in need of money during the journey.

Note: Zakat cannot be given to non-Muslims

You can also lend a hand to the welfare organisations that accept Zakat.  

Exceptions

Zakat can be given to the individuals mentioned in the list above; however, there are certain aspects one needs to keep in mind.

The receiving individual must not be:

• Rich
• Non-Muslim
• Descendants of the Holy Prophet (PBUH)
• Direct dependents (wife, parents, grandparents, children, and grandchildren)

It can only be given to the one who can own the amount; it cannot be given to any welfare organisation that does not give the complete amount to the needy.

Zakat can also not be used to make payments for the funeral of the deceased or to clear their debts, as they cannot be made the owner of the amount. 

Zakat Deduction in Banks

When you calculate your Zakat for the year 2021, keep in mind that Pakistan belongs to the list of the countries where Zakat has been made obligatory. 

The savings in your bank need to be enough or more for this to happen. It is calculated based on the silver Nisab. The respective banks on behalf of the State Bank of Pakistan will deduct 2.5% of your balance on the 1^st of Ramadan. 

This practice is called the deduction of Zakat at the source, and the amount is added to the Bait-ul-Maal. You no longer need to pay and calculate your Zakat, when the banks practice deduction of Zakat at the source.

FAQs About Zakat in Pakistan

Here are some of the most commonly asked questions about calculating your Zakat:

The individuals who have savings and assets that are more than Nisab, called the Sahib-e-Nisab can pay Zakat.

If you have 52.5 tola/21 ounces/612.36 grams of silver or 7.5 tola/3ounces/87.48 grams of gold, then you fall under the category of Sahib-e-Nisab.

As the value of some of your assets is in the local currency, it would make calculating your Zakat easier, if the rest of your assets are converted in the same currency as well.

In order to calculate the current rate of these commodities in Pakistan, you can simply search the internet.

Zakat is only applicable on future assets if:

• The property is being bought with the intention to sell it
• The sale is confirmed, however, have not received the amount yet

Yes, Zakat can be paid in installment throughout the year. Keep in mind; you will need to complete it before the start of the next lunar year.

2.5% of the net worth of Zakat is the least amount that a Sahib-e-Nisab has to pay. There is no limitation on the maximum amount of Zakat paid.

We have compiled all the necessary details about calculating your Zakat and the eligibility criteria. We hope that we have cleared all the confusion, however, if you think we have missed something, let us know at blog@jagahonline.com.

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