Zakat On Tax Free Salaries Earned With Basic Salary And Allowances
Firstly , whatever allowances are exempt by the state for tax purposes will also be considered exempt for Zakat purposes. Secondly , The principle is that zakat is on production or salary you earn for doing a job . If your employer is providing you money for something that’s required for you or is essential to be provided for you to do your job ( e.g. transport allowance or rent allowance etc. ), that money is not considered production, hence there is no zakat on it. For example : If they’re providing you an allowance for your phone bill, they have assumed that your job requires use of phone and instead of providing you with a company phone, they have made an administrative decision to give you the money instead. That’s exempt from production / earnings zakat. However, if they provide you $100 for phone bill but you end up spending only $80, the remaining $20 will end up in your bank account. When you pay 2.5% zakat on assets once a year, it will be covered there. Keeping this principle in mind, you will be paying 10% Zakat on your salary of 10K per month, with 2.5% Zakat on Assets once a year, which may or maynot include the remaining amount of Allowances as part of your wealth as at that date.
Zakat is not for the extremely poor only, rather it is for the needy as well. Infact, parents and close relatives have first right on Zakat, if they have any such need. Please refer to the videos in the following thread for further details : Discussion 66726 ______ ( Note : In future, please post questions unrelated to the main question as separate topic .)