# Understanding Zakat: Rules, Obligations, and Benefits for Muslims

![Zakat](https://www.investopedia.com/thmb/of8MLZXG4AZzQrbfaG7kBHozKVs=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/zakat.asp-final-c39d968c79ad42b9a0db6c8d1c564ce3.png)

*Zakat is based on income and the value of possessions. — Laura Porter / Investopedia*

> **Definition**
>
> Zakat is an Islamic financial obligation that requires Muslims to donate a portion of their wealth annually to charitable causes based on a minimum threshold known as nisab.

## What Does Zakat Mean?

Zakat is a mandatory [Islamic financial](https://www.investopedia.com/terms/i/islamicbanking.asp) obligation for Muslims to donate a portion of their [wealth](https://www.investopedia.com/terms/w/wealth.asp) yearly to charitable causes.

As one of the five pillars of Islam, zakat plays a crucial role in purifying wealth and supporting communities.

Muslims meeting the threshold, known as nisab, must give 2.5% of their wealth.

Unlike sadaqah, which is voluntary, zakat is compulsory for those eligible and is viewed as an act of worship.

### Key Takeaways

*   Zakat requires Muslims, who meet a minimum wealth threshold, to donate 2.5% of their wealth to charity annually.
*   It aims to purify income exceeding essential needs and supports various recipients like the poor and indebted.
*   The nisab is the minimum wealth level necessary to qualify for zakat, set by the value of 87.48 grams of gold or 612.36 grams of silver.
*   Zakat is distinct from sadaqah, which is voluntary charity, and is mandatory in several Muslim-majority countries.
*   Controversies exist regarding zakat's effectiveness in alleviating poverty due to issues with fund management.

## Understanding the Process of Zakat

There are five pillars of Islam: the declaration of faith, prayer, fasting during Ramadan, the Hajj pilgrimage, and zakat. Zakat is a compulsory procedure for Muslims who earn above a certain threshold. It's different from sadaqah, which is voluntarily giving to charity out of kindness.

Religious texts describe the minimum zakat amount to give to those less fortunate. It generally varies, depending on whether wealth came from farm produce, cattle, [business activities](https://www.investopedia.com/terms/b/business-activities.asp), paper currency, or [precious metals](https://www.investopedia.com/terms/p/preciousmetal.asp) like gold and silver.

Zakat is based on [income](https://www.investopedia.com/terms/i/income.asp) and the value of possessions. The common minimum amount for those who qualify is 2.5% or 1/40 of a Muslim's total [savings](https://www.investopedia.com/terms/s/savings.asp) and wealth. 

The recipients of zakat are:  

*   The poor and needy
*   Struggling Muslim converts
*   Enslaved people
*   Individuals in debt
*   Soldiers fighting to protect the Muslim community
*   Those stranded during their travels

The collectors of zakat are also compensated for the work they do.

> **Fast Fact**
>
> Annually, $200 billion to $1 trillion is spent on mandatory and voluntary charity in the Muslim world.

## Important Considerations for Paying Zakat

Zakat, one of the five pillars of Islam, is a required duty for Muslims who meet certain wealth criteria. This rule plays a major role in the history of Islam and has led to disputes, notably during the Ridda wars.

Zakat is a compulsory form of [tax](https://www.investopedia.com/terms/t/taxes.asp), though not all Muslims pay it. In many predominantly Muslim countries, individuals can choose whether to pay zakat.

That is not the case for countries such as Libya, Malaysia, Pakistan, Saudi Arabia, Sudan, and Yemen. Those who fail to pay zakat in places where it is compulsory are treated like [tax evaders](https://www.investopedia.com/terms/t/taxevasion.asp).

Zakat has faced significant controversy and criticism. Islamic scholars and development workers argue that it has failed to lift people out of [poverty](https://www.investopedia.com/terms/p/poverty.asp), prompting them to suggest that the funds are being wasted and mismanaged.

> **Important**
>
> A personal residence doesn't count toward wealth and thus doesn't count when calculating zakat. Property used to generate income, such as a rental or vacation home, does.

## Distinguishing Between Zakat and Nisab

Nisab is a term that often appears alongside zakat. It is a threshold, referring to the minimum amount of wealth and possessions that a Muslim must own before being obligated to pay zakat. In other words, if personal wealth is below this minimum during one lunar year, no zakat is owed for that period. The nisab is set at the value of 87.48 grams of [gold](https://www.investopedia.com/articles/economics/09/why-gold-matters.asp) or 612.36 grams of silver.

Not everyone pays zakat at the same time. That's where nisab comes into play. Individuals become eligible to pay zakat once they reach the threshold during the full lunar year. So one individual may owe it earlier than someone else.

There is no fixed payment date for zakat. But it is often paid out at the end of the year once calculations on any leftover wealth are made. Some Muslims believe that paying zakat during Ramadan brings good fortune.

People must regularly check their possessions and wealth, doing so weekly or monthly.  

## What Is Zakat in Islam?

Zakat is an Islamic financial term. As one of the pillars of the faith, it requires all Muslims to donate a portion of their wealth to charity. Muslims must meet a certain threshold before they can qualify for zakat. The amount is 2.5% or 1/40 of an individual's total savings and wealth. Zakat can be paid anytime during the lunar year. Some Islamic countries require citizens to pay zakat, while others do not.

## How Do You Calculate Zakat?

Muslims should take inventory of their possessions and wealth. Once they reach nisab or the threshold, which is the value of 87.48 grams of gold or 612.36 grams of silver, they must pay zakat. The total amount to be paid is 2.5% or 1/40 of their total savings and wealth. Muslims can use any number of zakat calculators that are available online to determine their obligations.

## What Are the Rules of Zakat?

Individuals must meet a certain threshold known as nisab in order to qualify for zakat every lunar year. This is set at the value of 87.48 grams of gold or 612.36 grams of silver. People whose wealth exceeds the value of these amounts must pay 2.5% of the value of their wealth in zakat. Individuals who do not meet this limit are not obligated to pay.

## How Much Are Muslims Obligated to Pay in Zakat?

Muslims are obligated to pay 2.5% of the total value of their wealth, less any liabilities in zakat, provided they reach nisab. This is the threshold, which is the value of 87.48 grams of gold or 612.36 grams of silver. Some Muslim countries make zakat mandatory, just like taxes. Others, though, do not obligate their citizens to do so.

## The Bottom Line

Zakat is one of the five pillars of Islam. It requires Muslims who meet the necessary wealth threshold, known as nisab, to donate 2.5% of their wealth annually to charity. It is said to purify yearly earnings beyond what is required to provide individuals and their families with their essential needs.

Zakat is distinct from voluntary charity like sadaqah and is mandated in several countries, like a tax but not universally enforced.

To calculate zakat, it's important to know one's wealth in relation to the nisab based on gold or silver values. Muslims should take regular inventory of their possessions and consider using online calculators to ensure they meet their zakat obligations.

Zakat is controversial because of its disputed effectiveness in poverty alleviation and its potential mismanagement.

It's important for Muslims to understand zakat requirements, especially in countries where it is legally enforced.

> **Article Sources**
>
> 1.  United Nations Development Programme. "[Zakat for the SDGs](https://www.undp.org/blog/zakat-sdgs)."
>     
> 2.  Elmaghrabi, Mahmoud, et al. "[Towards Developing Standards for the Zakat Administration in the Republic of Sudan](https://www.ijmar.org/v7n2/20-010.html)." _International Journal of Management and Applied Research,_ vol. 7, no 2, 2020, pp. 136–146.
>     
> 3.  National Zakat Foundation. "[Do I Pay Zakat on My House?](https://nzfcanada.com/zakat-faq/do-i-pay-zakat-on-my-house/)"