Economics Arctic

Query Answered: Subject-To-Use of Zakāh

Q 1: How is Zakāh defined?

A: Zakāh literally means purity and growth. Technically, it is a financial act of worship made mandatory for every Sȃhib al – Nisȃb Muslim, (With a property worth 612.360 grams of silver or 87.48 grams of gold, excluding his household effects, residence, and items of personal use, other than gold or silver jewelry), to purify his property, himself and the society of ills like miserliness, while the qualities of love, generosity, magnanimity, and cooperation may flourish and prosper.

Q 2: For whom is Zakāh obligatory? Elaboration in the context towards the status of women, minor children, prisoners, travelers, insane persons, and expatriates.

A: Zakāh is mandatory for sane, adult Muslim who is Sȃhib al – Nisȃb. For minor children, some jurists consider Zakāh not mandatory for an orphan, while others opine that the orphan must pay it when he reaches puberty. Another view is that the guardian pays Zakāh from the orphan’s property. Opinions vary on whether Zakāh is obligatory for the insane. Personally, I opine that he pays. For a prisoner, a person managing his assets pays Zakāh on his behalf. A wayfarer also pays Zakāh. A Pakistani Muslim expatriate residing abroad pays Zakāh like a Muslim citizen of another country residing in Pakistan. But a Muslim citizen of a non-Muslim country living in Pakistan has a choice to pay Zakāh as constitutionally his status is like a non-Muslim in the country of his origin.

Q 3: What should be the age of adulthood that makes a person eligible to pay Zakāh?

A: Eligibility to pay Zakāh is based on Nisȃb, not age. In the case of an under-age Sȃhib al – Nisȃb, his Wali (guardian) is responsible for ensuring its timely payment until he attains the age of puberty.

Q 4: What is the status of gold and silver ornaments of personal use? Are they subject to Zakāh?

A: Opinions vary. In one school, no Zakāh is payable on jewelry items for a woman’s personal use. In another, Zakāh is deducted only once in a lifetime from these items. The third view is that no Zakāh is chargeable on jewelry items used regularly but those that are worn occasionally are liable for Zakāh. The fourth and largely held opinion is that it is payable on all items of jewelry. This last opinion sounds more logical and correct to me based on the instructions of the Prophetic traditions.

Q 5: In the case of a joint-stock company, is it the responsibility of the company to pay Zakāh collectively or should the shareholders do this individually?

A: The companies should be made responsible for calculating and arranging payment of Zakāh for all their shareholders, excluding those holding shares less than the Nisȃb value or those owning shares for less than a year.

Q 6: Views regarding Zakāh on factories and other commercial establishments.

A: There is no Zakāh on machinery and factory equipment. It is levied on the cost-value of inventories, both in raw and finished forms and on the cash balance in a factory’s accounts at year-end. There is also no Zakāh on furniture, stationaries, shops or houses, or personal items. Zakāh must be paid on goods meant for sale and on cash balance in their accounts at year-end. The basic principle is that the factors of production employed to make products are exempt from Zakāh.

Q 7: In the case of transferable shares, who is responsible for paying Zakāh, the one who purchased the share or the person who sold it?

A: There is no Zakāh on shares sold during one Zakāh-year, either for the seller or the buyer, because neither of them has owned these shares for one full year.

Q 8: On what type of assets and items is Zakāh deductible with reference to the following.

a. Cash, silver, gold, jewelry, and gems?

b. Coins of gold, silver, or metal and currency notes?

c. Bank deposits, assets in lockers, money taken in loans, mortgaged property, disputed property, or property under litigation?

d. Gifts?

e. Insurance Policies and the sum of money received from a Provident Fund?

f. Livestock, dairy products, and agricultural products, including food grains, vegetables, fruit, and flowers?

g. Minerals?

h. Buried treasure when discovered?

i. Antiques?

j. Honey from the wild and the bee farms?

k. Fish, pearls, and other marine items?

l. Oil?

m. Imports and exports?

A: a. Zakāh is levied on cash, gold, silver, and jewelry items. There is no Zakāh on pearls, rubies, and gems of all categories not for sale, otherwise, they are Zakatable if they are for sale.

b. Metallic coins and currency notes are subject to Zakāh like gold and silver.

c. All deposits in banks, in government-registered and audited institutions are Zakatable. There is no Zakāh on loans for personal needs, but loans above Nisȃb, unspent in one full year are Zakatable. A loan invested in the business is part of the total amount for business Zakāh. For mortgaged property, Zakāh is collected from the person holding the property in his custody. Zakāh on a disputed property is charged from the person occupying it.

d. If a gift is up to Nisȃb, the recipient pays Zakāh on it after one year of his ownership.

e. For compulsory savings in an insurance policy or provident fund, Zakāh is paid only once after a year from the receipt of the amount. If savings are optional then, in my view, the person must pay Zakāh yearly on the sum of money available in his insurance or provident fund.

f. The livestock of a dairy farm are factors of production, thus not Zakatable. Agricultural produce and fruit that are stored are liable for ‘Ushr or Khums (one-tenth or one-fifth of its total value). There is no ‘Ushr on perishable items like vegetables unless they are for sale.

g. Regarding minerals, the Hanbalis have the best approach, i.e. everything mined is subject to a 2.5% Zakāh deduction if it is private property and its value is up to the Nisȃb level.

h. For discovered treasure (Rikȃz), the Hadith says that Khums is to be charged as Zakāh.

i. There is no Zakāh on antiques and precious relics kept at home as souvenirs, but they are Zakatable if they are commercial items for sale.

j. Regarding honey, according to Imam Malik, Imam Shafi’i, they are not Zakatable. I subscribe to the Hanafi views that honey for sale is subject to Zakāh like other commercial items.

k. There is no Zakāh on fish for personal consumption, but Zakatable if it is for sale. As for pearls, ambergris, and other marine items, I consider them minerals and hence Zakatable.

l. Oil also belongs to the category of minerals and is, therefore, subject to Zakāh.

m. There is no Zakāh on imports and exports.

Q 9: Did the Rightly-Guided Caliphs make any addition to the list of items for Zakāh from the days of the Holy Prophet (Peace Be Upon Him)? What rules were observed for such additions or amendments, if any?

A: During al-Khilȃfah al-Rȃshidun, no additions were made to the list of Zakāh items approved by the Prophet (Peace Be Upon Him). Some additions were made later, for example, the Umayyad Caliph ‘Umar bin ‘Abd al-Aziz imposed Zakāh on buffaloes at the rate of Zakāh levied on cows by the Prophet (Peace Be Upon Him).

Q 10: Is Zakāh leviable on metal coins other than gold and silver? Is it also payable on coins out of use, those withdrawn by the government, or coins of other countries in a person’s custody?

A: Zakāh is paid on coins of all categories. Coins out of use are subject to Zakāh if they are made of gold or silver. Foreign currencies, if easily exchangeable locally, are treated as cash. If these are non-convertible, their values are assessed based on their gold and silver content.

Q 11: Al-Amwȃl al-Zȃhirah (open assets) and al-Amwȃl al- Bȃtinah (hidden assets). Under what category to place bank deposits?

A: Al-Amwȃl al-Zȃhirah is assets open to government functionaries to assess, while al-Amwȃl al- Bȃtinah is assets inaccessible to state operatives. Bank deposits belong to the first category.

Q 12: What is al-Mȃl al-Nȃmi (Growing Asset). Is Zakāh leviable on the property of this category alone?

A: Al-Mȃl al-Nȃmi is an asset intrinsically amenable to growth or that which can be increased through efforts and struggle. Zakāh is levied only on assets of this category. It is charged on accumulated wealth mainly because its owner has prevented it from further growth.

Q 13: What rules are applied to Zakāh on immovable property, jewelry, and items of rent, like taxis, etc.

A: The market value of rental items is assessed and 2.5% is deducted from earned profit as Zakāh.

Q 14: What is the rule of Zakāh on domesticated animals like buffalos, chickens, and pets? Is it paid in cash or kind, or both? What are the number and conditions, which these animals are Zakatable?

A: Livestock, including buffalos, are liable for Zakāh when reared for breeding and are worth Nisȃb value. If for sale, they are subject to 2.5 percent of Zakāh. Animals and poultry for domestic use are exempt from Zakāh, except if they are for sale. Zakāh on livestock is collected in cash and in kind.

Q 15: Different rates of Zakāh charged on various goods and items.

A: The prescribed rates of Zakāh on agricultural produce are 10 percent from rain-fed arid lands and at 5 percent from irrigated lands. Other different items including cash, gold and silver, commercial goods, livestock, mineral, Rikȃz (Discovered treasure), and factory goods are at 2.5 percent.

Q 16: Has there been any amendment in Zakāh rates in the era of al-Khulafȃ’ al-Rȃshidūn on cash, coins, livestock, commercial goods, and agricultural products? If so, why the amendments?

A: There has never been any modification in Nisȃb and Zakāh rate in the era of the al-Khulafȃ’ alRȃshidūn or thereafter. In fact, nobody is authorized to introduce any change as whatever the Prophet (Peace Be Upon Him) prescribed as a matter of the rule is sacrosanct and cannot be changed.

Q 17: What are the cash equivalents of 200 silver Dirhams and 20 golden Mithqȃls and, the standard weights and measures equivalent to the Sȃ and Wasaq for Zakāh on food grains?

A: The approved Nisȃb for cash, silver, commercial goods, minerals, Rikȃz, and factory goods is their worth of 200 Dirhams in value. The established equivalent of 200 Dirhams is 52.5 Tolas (=612.360grams) of silver and 20 Mithqȃls is equal to 7.5 Tolas (= 87.48 grams) of gold.

Q 18: Is there a fixed term on the expiry of which Zakāh is payable on different items?

A: Except for minerals, treasures, and agricultural produce, the standard period is one calendar year. There is no term limit for minerals and treasures, while Zakāh on agriculture is upon harvesting.

Q 19: Is Zakāh calculated according to the lunar or solar calendar? Any month for its collection?

A: The Shari’ah has not made any calendar or month obligatory for the Zakāh collection. An Islamic government can fix any month and calendar for the collection and calculation of Zakāh.

Q 20: What are the main categories for Zakāh disbursement? Meaning of ‘Fi Sabīlillȃah’?

A: The Qur’an specifies eight categories for the distribution of Zakāh funds. These are as follows.

Fuqarā’ (poor), Masȃkin (the needy), Āmilīn (those employed for the collection of Zakāh), Mu’allafat’l-Qulūb (those whose hearts are to be reconciled), al-Riqāb (those in bondage), Ghārimīn (those burdened with debt), Fi Sabīlillāh (in the Way of ALLAH TAA’LA) and Ibn al-Sabīl (the Wayfarer).

Q 21: Is it necessary to distribute Zakāh to the deserving under each of the eight prescribed categories, or can it be given to the needy according to one’s own discretion?

A: It is not essential for the government or an individual to distribute Zakāh under each category. The Zakāh funds can be disbursed based on the needs of various heads, or a single category.

Q 22: Under what circumstances are the eight categories permitted to receive Zakāh? Are the members of the Bani Hashim family and Sayyids entitled to receive Zakāh?

A: From the Fuqarā’ and Masȃkin, only those who are not Sahib al-Nisab can get Zakāh. Āmilīn, Mu’allafat’l-Qulūb, and fi Sabīlillāh, though Sahib al-Nisab, receive Zakāh. The slave is entitled to Zakāh for his freedom. One overburdened with a loan is paid Zakāh to settle his debt. Ibn al Sabil receives Zakāh if he is in need during his journey. Zakāh is prohibited for Bani Hashim.

Q 23: Is Zakāh payable to individuals, or can it be given to institutions also, like orphanages, destitute homes, educational institutions, etc?

A: When collected by the government, Zakāh can be disbursed to individuals as well as institutions.

Q 24: Can Zakāh funds be used to provide life-long monthly maintenance allowances to the poor, the needy, widows, the handicapped, or those incapable of earning due to old age or incapacitation?

A: Yes, Zakāh can be given in the form of stipends or allowances to those in need due to temporary or permanent incapacitation, disease, old age, etc.

Q 25: Can the Zakāh funds be used for public welfare schemes, as the building of mosques, hospitals, roads, bridges, wells, and ponds?

A: The category of Fi-Sabīlillāh is not so loose as to include such works of public welfare.

Q 26: Can a person be offered al-Qard-al-Hasan or an interest-free loan from Zakāh funds?

A: There is no harm in extending al-Qard-al-Hasan from funds available with the Zakāh administration.

Q 27: Is it necessary for Zakāh to be spent in the area where it has been collected from, or can it also be sent outside to help in the emergency needs of disaster relief, or to win hearts?

A: It is desirable under normal circumstances to spend Zakāh in the area where it is collected. In the case of an emergency, extra Zakāh funds can be transferred to other places in need of resources.

Q 28: What is the way of deducting Zakāh from the property left behind by one who is deceased?

A: Settlement of deceased’s loan, if any, takes priority, then Zakāh deduction, and execution of his will. The remaining assets are distributed among heirs, according to the Islamic law of inheritance.

Q 29: Measures to prevent people from avoiding payment of Zakāh.

A: These measures may include the appointment of honest officials to forestall possibilities of bribery and irregularities in Zakāh administration, or favoritism in its distribution, and the squandering away of funds on staff salaries and allowances. Secondly, the government should build society’s edifice on moral values, good character, love, and fear of God. Thirdly, necessary legislation should be enacted to check the unlawful means for any embezzlement of Zakāh funds.

Q 30: Should the administration of Zakāh be the responsibility of the center, or the provinces? If the subject falls under the center’s jurisdiction, what steps need to be taken to determine the shares of the provinces and other areas from the main pool?

A: The responsibility of the collection and distribution of Zakāh should rest with the provinces, while the center enjoys the power to divert the surplus of one province to a Zakāh deficient province. The center should also have the power to launch institutions and schemes to perform charitable work in the Way of ALLAH TAA’LA and to mobilize emergency relief operations.

Q 31: The best way to manage the collection and disbursement of Zakāh? Should there be a separate entity or does the government does this job through its existing department?

A: The government needs not to establish a separate department for this purpose. The collection and distribution of different kinds of Zakāh can be entrusted to the departments engaged in collecting taxes. As for the distribution and disbursement of Zakāh under the different specified heads, a separate set-up can be placed under the Minister of Awqaf and other religious institutions.

Q 32: Has Zakāh ever been treated as a government tax or is it a tax for the collection and administration of which the government alone is responsible.

A: Zakāh is not a tax, but an act of ‘financial worship’. The two differ greatly in concepts and moral backgrounds. Treating Zakāh as a state tax will destroy its moral and spiritual value and benefits. To vest the government with the responsibility for its collection and distribution does not mean that it is a tax. Government is responsible to streamline Zakāh and ensure its proper discharge.

Q 33: Was there any tax other than Zakāh during the days of the Prophet (Peace Be Upon Him) and His Caliphs?

A: “There are obligations in one’s property other than Zakāh” (Tirmidhi). Thus, the Islamic government has the right to levy taxes in addition to administering Zakāh. There are precedents for levying taxes during the reign of the Second Caliph when import duty was imposed for ‘public fund.’

Q 34: What system of Zakāh collection and disbursement by Muslims in the past is in practice now?

A: In the earlier days of Islam, collectors were appointed by the government. They physically inspected al-Amwāl al- Zahirāh and collected Zakāh. The funds were deposited in the public treasury (Bayt al-Māl) in separate accounts. It was distributed by state officials responsible for other duties as well. Presently I am not aware of how governments in the Muslim world administer Zakāh.

Q 35: Should the collection and distribution of Zakāh be the exclusive responsibility of the government, or can it be managed by a Board of Trustees under joint public-private control?

A: Zakāh collection and distribution should remain under the control of the Islamic government in proper check and balance.

Q 36: What should be the terms of employment, viz. pay and allowances, pension, provident fund, etc., for the staff employed to collect and distribute Zakāh?

A: The terms of service for Zakāh and other government employees should be similar.

Q 37: One gentleman with religious credentials firmly believes that the rate of Zakāh may be revised according to the circumstances and needs of the day. He argues that the Qur’an does not mention any rate for Zakāh deduction.

A: We are not entitled to make amendments in the parameters drawn by the Law-giver. Islamic Law is sacrosanct in every respect. Once we allow change, major or minor, it will open the floodgates for willful modifications, sparing no Islamic injunction. This would disrupt the balance and harmony established by the Law-giver for maintaining a just order.

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The divine scriptures are God’s beacons to the world. Surely God offered His trust to the heavens and the earth, and the hills, but they shrank from bearing it and were afraid of it. And man undertook it.
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