19th Safar 1444AH
Assalamu alaykum warahmatullahi wabarakaatuh!
Procedures for Calculating Zakah
A proper understanding of the procedures for assessing people and properties to Zakah is particularly critical for Muslims residing in countries where the Shari’ah is not the operating law. This knowledge will help him understand the rights of Allah in the myriad of properties that he has acquired. Zakah assessment procedures involve the following:
1. Determining the end of the year, for the time at which Zakah is to be calculated. It varies according to the type of property liable to Zakah except for the Zakah due on plants, fruits, metals and natural resources which falls due at the time of harvest or on discovering mineral and sea resources.
2. Determining and evaluating the various types of properties owned by a given person who is asked to pay Zakah, and determining what is included in Zakah and thus called “the properties liable to Zakah”, or “the Zakah funds”. The assessed properties for an individual may have different qualifying year end and may require adjustments to bring them up to a common base.
3. Determining and evaluating the commitments to be paid and deducted from the properties liable to Zakah. This includes debts owed, pledges made and allowances for personal upkeep.
4. Determining the minimum amount liable to Zakah according to the type of property or activity. This is called Nisab. Zakah needs only be paid on those assets that exceed a minimum value (for monetary assets), quantity (livestock) and weight (mineral resources).
5. Determining the due quota for Zakah. The rate applicable for Zakah varies according to asset type and nature and can be:
a. 2.5% as in Zakah due on gold and silver, trade, used objects, work earnings, profits and minerals, according to the opinion held by the majority of scholars.
b. 5% as in Zakah due on crops and fruits that are irrigated by tools and equipment (with irrigation costs).
c. 10% as in Zakah due on crops and fruits that are irrigated by springs and rain (without irrigation costs).
d. 20% as in Zakah due on mineral resources.
6. Calculating Zakah by multiplying its percentage by the total amount liable to Zakah.
The Rules of Calculating and Distributing Zakah
There are rules that govern the processes of determining, measuring, and distributing Zakah. These rules are deduced from sources of Islamic Law or based upon common accounting. They include the following:
1. Hawl (The completion of a full year): Islamic jurisprudence considers the lunar year a sufficient period for increase. Therefore, a person who is legally required to pay Zakah must calculate all his properties according to their market value after a full year elapses. Your assets must be evaluated every year according to their market value. The one who undertakes this process of evaluation must be just. However, this position cannot be applied to Zakah due on farm produce (which falls due upon harvest) and mineral resources (upon extraction).
The Shafi`ites, for example, are of the view that the completion of a whole year is a condition for Zakah to be obligatory. However, completion of the year is not observed for the Zakah due upon grains, and mineral resources while the Malikis said completion of the year is not a condition to be observed for the Zakah due upon mineral resources and plants.
2. Independence of fiscal years: Based on the previous principle of the completion of the year, calculating Zakah also depends on the independence of the fiscal year. If a given person spent some of his wealth before the completion of a whole year, even shortly before its close, or it was lost, no Zakah would be due on that particular amount. He must pay Zakah on the rest of the wealth if it reaches the minimum amount specified for Zakah and if the fiscal year elapses. But, if he spent some of his wealth upon which Zakah was due after completion of the year, even shortly after, or it was lost by any means, he must pay Zakah on it. The implication of this rule is that:
Each year is independent of the previous year depending on the situation of the person assessed to Zakah;
You may have Zakah liability in one year and in another year you do not have any obligation if your wealth does not reach the Nisab.
3. Real or assumed increase: The basis of Zakah calculation relies on the increase (value appreciation) of the property liable to Zakah whether actual or estimated regardless of whether or not the property decreased in value from the minimum amount liable to Zakah at any time in the year or that the increase was not added to the capital. Profit is an increase in wealth that takes place during the fiscal year. Thus, whether the wealth diminishes by being converted to cash or is kept in the form of inventory by not being sold, there is a profit in both cases, as selling is nothing but converting the inventory into cash, which clearly shows the real profit.
4. Financial ability: The calculation of Zakah is contingent on the financial ability of the one who is required to pay it such that he should possess the minimum amount upon which Zakah then becomes due. Among the many Qur’anic verses related to this topic is: “And they ask you what they should spend; say: What is superfluous” (Q2:219). This great Islamic principle does not aim at overburdening Muslims. It also urges them to prosper.
5. Zakah is due upon the net revenue or the total sum according to the kind of activity concerned: In addition to the principle of ability, Zakah is also based on the principle of deducting current debts and other costs from the revenue or wealth in general. This is in order to make it easier for those who are required to pay Zakah. Proof for this principle is easily found, such as that stated by Abu `Ubaid and others: “If Zakah becomes due upon you, consider what you have in cash and other assets; then evaluate these assets in terms of money. Total what others owe you and your debts to others and deduct them from the whole amount; and then pay Zakah on what is left.” The Messenger of Allah (SAW) used to ask those who carry out the process of estimating and evaluating crops and fruits in order to determine the Zakah base to be kind and lenient with the people, as he used to say: “If you were to estimate and evaluate (the fruits) you take and leave one-third, and if you did not leave one-third, then leave one-fourth. (Narrated by Ahmed)
It is evident from the previous points that the basis of Zakah calculation takes into consideration debts and costs that are necessary for earning a living, and the personal and family affairs of those who are required to pay Zakah.
6. Totaling property: All properties liable to Zakah are to be totaled and accounted for after determining the owner’s debts. Ibn Al-Qayyim said: “The value of the merchandise is to be considered according to the trade prices in the countries in which these goods are found. So, if a given person sent some sort of goods to another country and it was traded before the completion of the fiscal year, its value would be counted according to the prices of that particular country. Also, one should combine the different kinds of goods and inventory in the evaluation process and offer Zakah upon all of them.”
7. Evaluation according to the current rate of exchange (market value): Islamic calculation of Zakah is based on evaluating the inventory before the end of the fiscal year in order to determine the Zakah due according to the current rate of exchange principle. Jabir bin Zaid said about inventory intended for speculation in trading: “Evaluate and estimate it [your inventory] according to its market value on the day when Zakah falls due, then pay its Zakah.” This was unanimously agreed upon by the majority of jurists.
We will stop here for now to continue, insha Allah, with other segments in the days ahead. May Allah make it easy for us to understand this topic and endow us with wealth with which we shall fulfill this all-important pillar of our deen. Aamiiin!
Wasalamun alaykum warahmatullah!
Suleiman Zubair
