What is Zakat and who must pay it?
Zakat is the third pillar of Islam — an obligatory annual payment of 2.5% on qualifying net wealth held for one full lunar year above the nisab threshold. It is not a tax, a donation, or charity: it is a right of the poor over the wealth of the rich, prescribed in the Quran and Sunnah. Every Muslim who has held wealth above the nisab for one lunar year (hawl) must pay Zakat, regardless of gender or age. Zakat purifies accumulated wealth, redistributes resources within the Muslim community, and fulfils a direct command of Allah. Unlike Sadaqah which is voluntary, Zakat is fard — obligatory.
What assets are zakatable?
Zakatable assets include: cash and money in bank accounts (savings, current, and investment accounts); gold and silver (jewellery, bullion, and coins) valued at current market price; business inventory and stock held for the purpose of trade (at market value); shares in companies (calculated based on the company's underlying zakatable assets, not just market price); money owed to you that you reasonably expect to recover; and agricultural produce and livestock at specific rates different from 2.5%. Personal use items are not zakatable — your home you live in, your personal vehicle, your clothing, household furniture, and tools you use to earn a livelihood.
Understanding the nisab
The nisab is the minimum threshold of wealth above which Zakat becomes obligatory. It is set at the equivalent value of 85 grams of gold or 595 grams of silver. Since silver's price per gram is much lower than gold's, the silver nisab results in a significantly lower threshold. Many scholars recommend using the silver nisab (the lower value) because it includes more people in paying Zakat and benefits more recipients. The nisab changes constantly as gold and silver prices fluctuate — always use current market prices rather than a fixed figure. Our Zakat calculator lets you choose your nisab basis and enter current prices.
The hawl: the lunar year condition
Zakat is only due if your wealth has been above the nisab for a complete lunar year (hawl). If your wealth drops below the nisab at any point during the year — even briefly — the hawl resets and a new year begins from when it next crosses the threshold. This is why most Muslims choose a fixed date each year to check their wealth, calculate their nisab, and pay Zakat — commonly the first day of Ramadan or a specific calendar date. The hawl applies to most categories of wealth. Note that agricultural produce has its own rule: Zakat is due at the time of harvest, not after a full year.
Deducting liabilities
You may deduct genuine liabilities from your zakatable wealth before calculating Zakat. If you owe money that is due now (rent, utility bills, short-term debts), deduct this. Long-term debts like home finance instalments are more complex: scholars differ, but a common view is to deduct only the portion currently due (the next year's instalments) rather than the full remaining balance. Outstanding loans you have given to others that you reasonably expect to recover are added to your wealth as receivables. The principle is to calculate your net zakatable position: what you truly own minus what you genuinely owe now.
Who receives Zakat?
The Quran in Surah At-Tawbah (9:60) specifies eight categories of Zakat recipients: the poor (fuqara), the needy (masakeen), those employed to administer Zakat, those whose hearts are being reconciled, for freeing slaves, for those in debt, in the cause of Allah, and for the traveller. In practice, most Zakat today goes to the first two categories — the poor and needy. Zakat cannot be given to non-Muslims (except those whose hearts are being reconciled to Islam), to direct dependants (wife, children, parents), or for mosque construction or general charitable projects. Use a reputable Islamic organisation that correctly distributes to eligible recipients.