Zakat On Service Business Income
Wa’alikum Salam. There are two major domains of Zakat that apply to the most people – namely ‘ Wealth and Production’ For production: zakat applies on gross amount as soon as production happens. It is calculated @ 5%, 10% or 20% depending on the mix of Labor and Capital i.e. 5% on amount earned from a combination of both labor and capital 10% on amount earned from either labor or capital 20% on amount earned without labor or capital AND For wealth: zakat applies once a year on a fixed date on all the wealth @2.5% ( excluding exemptions : (i) items of personal use and (ii) means of production ). This is as per established Sunnah of Prophet (SWS) for wealth and Production. When production occurs, the zakat becomes due immediately on the gross amount ( irrespective of the fact when one actually pays it ). The same applies to the Service sector earning, Salary earning, Manufacturing business etc. However, one can calculate it on yearly gross earning and can pay it in installments as well. After payment of this Zakat, whatever left is considered one’s wealth . And if that wealth still stays with the person till the year-end i.e. the date fixed once a year for calculation of Zakat on wealth , then the whole wealth is subject to Zakat ( 2.5% of the sum total of all of your cash as well as the current value of all other assets in your possession on the day when your zakat becomes due ). If one spends the same wealth one day before the year-end date, then there is no zakat on that wealth. Both these heads are subject to Zakat only if they reach the set Nisab for Zakat Obligation . Nisab : – Nisab for production / earnings is the minimum amount below which your state exempts tax or zakat on earnings . If your state does not provide a nisab then you can use the standard nisab of 653 kg of Dates or equivalent value . – Nisab for assets/wealth is the minimum amount below which your state exempts tax or zakat on assets . If your state does not provide a nisab then you can use the standard nisab of 642 grams of silver or equivalent value . However, there can be difference of opinion on whether Zakat percentage should be applied on amount only above Nisab threshold or on the whole amount as soon as it crosses the Nisab threshold. Ghamidi Sahab prefers the latter opinion, but it is not something fixed in Sharia. Taxes paid in any country (e.g. U.S.) that uses it for the benefit of its citizens can be deducted from your total zakat obligation. You may enter appropriate numbers in our Zakat Calculator after reading the description for each box. When you reach the end, it will generate a statement showing you exactly what you owe after any applicable deductions, and what percentage was applied to each category. It’s also a great way to learn the sharia of zakat. View Zakat Calculator For details about the sharia of zakat as well as frequently asked questions in this regard please see: Discussion 46733