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An Educational Guide to (Obligatory Charity for Muslims) This mailer is intended to reach Muslim households. If you have received this mailer in error or if you would like to be removed from future Hidaya Foundation mailings, please email your name and address to [email protected]. Hidaya Foundation

What is Zakat? “Allah will destroy (usury) and will give increase for Sadaqat (deeds of Zakat is an obligatory act of charity charity, alms, etc.) And Allah likes not the ordained by Allah, Subhanahu wa disbelievers, sinners.” [Al-Quran 2:276] Ta’ala (The Glorified and Exalted), to be performed by every sane adult Muslim “And whatever you give for interest to who possesses a certain minimum amount increase within the wealth of people will of wealth (called Nisab) for a complete not increase with Allah. But what you lunar year. Zakat is: give in Zakat, desiring the countenance 1. One of the five pillars of , which of Allah - those are the multipliers.” [Al- are: Believing in Allah and his Messenger, Quran 30:39] Salat (5 daily prayers), Zakat (obligatory charity), (pilgrimage to Mecca), and Who must give Zakat? Sawm (fasting in Ramadan). 2. A form of (charity) which is Zakat should be given by people who fit obligatory on Muslims; it is an act of the following criteria: (worship) and not a . 1. The person should be Muslim, adult 3. Owed on specific assets only, identified (above age of puberty), sane, free (not by Islamic Law as assets having the a slave). potential for growth, i.e. “Zakatable 2. They must possess a certain minimum assets”. amount of extra wealth (called Nisab), 4. The compulsory transfer of ownership fully owned by them, in excess of items of a portion of the property of the of personal use (such as clothing, food, giver, calculated at the rate of 2.5%, to shelter, furniture, utensils, car, etc.) poor and needy Muslims who qualify to 3. They should have had this minimum receive Zakat according to Islamic Law. amount in possession for a complete 5. Calculated after a lunar year on the lunar year (hawl). market value of the Zakatable assets 4. The wealth should be of a productive after deducting specified liabilities. nature, from which they can derive With regards to calculations (and specific profit or benefit such as merchandise for information throughout this document), business, gold, silver, livestock, etc. we have followed the school of 5. The person’s zakatable assets should be thought. Information on other schools free from debt. of thought may be found by researching (Islamic Jurisprudence) books, or What if I don’t give Zakat? consulting scholars. Allah (SWT) has strongly warned those who are negligent in paying their Zakat. What is the meaning of Thus He said in Al-Quran, “ . . . Those who Zakat? hoard up treasures of gold and silver and spend them not in the way of Allah; give The literal meaning of Zakat is “to purify, them the news of a painful punishment, to grow, and to increase.” It comes from on the Day when that (wealth) will be the root letters za, kaf, ya, which has heated in the Fire of Hell and with it will be several meanings in Al-Quran: to purify or branded their forehead, their sides, and be purified [Al-Quran Chapter 24: Verse their backs, (and it will be said to them:) 21], to be pure [Al-Quran 19:13, 19:19], ‘This is the treasure which you hoarded for to grow [Al-Quran 80:3], to increase [Al- yourselves. Now taste of what you used to Quran 92:18], and to pay the obligatory hoard.’” [Al-Quran 9:34-35] charity [Al-Quran 2:43]. The word “Zakat” Further, on the authority of ‘Ali, that the has been used to mean all of these things. Prophet (PBUH) said: “Allah has enjoined upon rich Muslims a due to be taken from Why should I give Zakat? their properties corresponding to the Allah (SWT) commands in Al-Quran, “Take needs of the poor among them. The poor alms out of their property, you would will never suffer from starvation cleanse them and purify them thereby, or lack of clothes unless the rich and pray for them; surely your prayer neglect their due. If they do, Allah will is a relief to them; and Allah is Hearing, surely hold them accountable and punish Knowing.” [Al-Quran 9:103] them severely.” [Related by At-Tabarani in Al-‘Aswat and As-Saghir]

For help with calculating your Zakat or any other Zakat related questions, email us at [email protected] When is Zakat due? A complete year in the Islamic calendar of Nisab. Zakat should be given as soon should pass, starting from the very day as possible after it becomes due. If it so of the Nisab’s possession, without any happens that death occurs and thus leads decrease below Nisab during the year. In to the failure of fulfilling one’s obligations, case zakatable assets decrease below the zakat should be taken from the estate of value of Nisab, the year cycle (hawl) starts the deceased. Please see Figures 1 - 3 on from the day wealth again reaches value the back page for further explanation.

What things require giving Zakat on them? Gold, Silver, Cash, and many other items to the value in the international market. are subject to Zakat. Hence when calculating the value of your Gold and Silver: Asma bint Yazid reported: gold and silver, you may consult a jeweler “My aunt and I, while wearing gold bracelets, for the correct weight and value. Any jewels went to the Prophet (PBUH). He asked: ‘Did in the gold or silver are not Zakatable. you pay their Zakat?’ She related that they had Cash: The amount of cash held, whether not. The Prophet (PBUH) said: ‘Do you not in a bank or personally on hand, at the end fear that Allah will make you wear a bracelet of the relevant Zakat year will always be of fire? Pay its Zakat.” [Narrated by Ahmad subject to Zakat. Money lent and advanced (6:461) with a good chain, as Haythami should be treated as cash and Zakat must declared in Majma` Al-Zawa’id (3:67)] be paid on such loans each year. Narrated Anas: When Abu Bakr; sent me The Nisab for cash is equivalent to the to (collect the Zakat from) Bahrain, he value of gold or silver (whichever is less). wrote to me the following . . . For silver the Presently, the Nisab of silver is less, so Zakat Zakat is one-fortieth of the lot (i.e. 2.5%), on cash is calculated according to the Nisab and if its value is less than two-hundred of silver, which on June 1, 2012, was , Zakat is not required, but if the $564.28. For calculating Zakat, the value owner wants to pay he can. [Sahih Al- of all Zakatable assets can be converted to Bukhari: Vol. 2, Book 24, No. 534] a cash figure, and if the total value is more Gold and silver, whether in the form of than the value of Nisab throughout the year, jewelry or otherwise, will always be subject then Zakat should be given. to Zakat provided their respective weights Other items which require paying Zakat exceed the Nisab amount. According include: Stocks, Mutual Funds, Stock Options, to scholars, Nisab for gold is 20 Employee Stock Purchase Plan, Business (~87.49 grams), and the Nisab for silver is Merchandise Inventory, Private Companies, 200 dirhams (~613.35 grams). Corporations and Partnerships, Retirement Plans (401K, IRA, etc.), Real Estate Investments Nisab Grams Ounce Troy oz. Gold 20 mithqal 87.49 3.086 2.8125 in Property Owning Companies, Accounts Silver 200 dirhams 613.35 21.635 19.6875 Receivable, Profits from Investments, Trusts, Lump Sum Payments in Terms of Compulsory The prices of gold and silver vary daily in Pension and Provident Funds, Severance international markets. On June 01, 2012, Packages, Income Tax Refund, Buried Precious the price of gold was approximately $52.29/ Metals or Minerals (Rikaz), Livestock (like Cows, gram and silver was $0.92/gram. Therefore, Sheep, Camels), and Agricultural Produce. the Nisab for gold is approximately $4,574.85 Please keep in mind that any financial ($52.29 x 87.49 grams) and the Nisab for dealing that involves interest is silver is approximately $564.28 ($0.92 x considered unlawful in Islam. One 613.35 grams). To find out latest gold and must be very careful to avoid such silver prices, visit: www.goldprice.org dealings to keep his or her wealth Zakat on gold and silver will be according purified and blessed. What things do not require giving Zakat on them? Money that does not reach the amount are not of productive nature, even if they of Nisab, any property that is not used exceed one’s needs (car, utensils, furniture, for business purposes, liabilities which etc.), provided they are not intended for one must pay back, any possessions that trade and deposits. Who should receive Zakat? Who should not receive Zakat? There are eight groups of people on whom Zakat can not be given to one’s parents, Zakat should be spent, as mentioned grandparents, children, grandchildren, in Al-Quran: “The alms are only for the wife, husband, or family descendants of Fuqaraa (the poor), and the Masakeen the Prophet Muhammad (PBUH). Zakat is (the needy) and those employed to collect only given by Muslims to Muslims. (the funds); and to attract the hearts of It is very important to make certain that those who have been inclined (towards the recipient of zakat is deserving of it Islam); and to free the captives; and for before giving him/her Zakat. If Zakat is those in debt; and for Allah’s Cause, and given without inquiry and subsequently it for the wayfarer (a traveler who is cut is discovered that the recipient was not off from everything); a duty imposed by deserving of it, then the Zakat is not valid Allah. And Allah is All-Knower, All-Wise.” and should be given again. [Al-Quran 9:60] The verse above describes the following Why making intention for eight groups of people: giving Zakat is necessary: 1. Fuqaraa: Those who own property in excess of basic necessities but below Narrated Umar bin Al-Khattab: I heard the value of Nisab Allah’s Apostle saying, “The reward of 2. Masakeen: Persons of extreme poverty deeds depends upon the intentions who possess no wealth whatsoever and every person will get the reward 3. Aamileen: (Zakat collector) According according to what he has intended. So to Scholars, those persons who are whoever emigrated for worldly benefits appointed by an Islamic Government or for a woman to marry, his emigration to collect Zakat. It is not necessary that was for what he emigrated for.” [Sahih Al- this be a needy person Bukhari, No. 1] 4. Muallafatul Quloob: Those poor and needy persons who are given Zakat with It is obligatory to make a niyyah the intention of solidifying their hearts (intention) for the fulfillment of Zakat. If because they may be recently converted the intention is not made, the Zakat will to Islam or to help bring them closer to not be valid. While giving, the intention Islam should be that “I am giving this as Zakat.” 5. Ar-Riqaab: Slaves whose masters have agreed to set them free on a payment It is not necessary to reveal to the needy of a fixed amount, Zakat may be used to person to whom the Zakat is given that purchase their freedom the cash or kind that is being given to 6. Al-Ghaarimeen: A person whose him/her is Zakat. debts exceed his assets and his net assets (after deducting his liabilities) is What about Zakat that I below the Nisab limit 7. Fi Sabeelillah: Those who are away have not given in the past? from home in the path of Allah Ibn ‘Abbas reported: A woman came 8. Ibnus-Sabeel: A traveler, who, whilst to the Messenger of Allah (PBUH) and wealthy at his residence, is stranded said: My mother has died, and fasts of a and in need of financial assistance month are due from her. Thereupon he Who can receive Zakat (PBUH) said: Don’t you see that if debt was due from her, would you not pay it? among relatives? She said: Yes (I would pay on her behalf.) Zakat can be given to one’s brother, sister, Thereupon he said: The debt of Allah nephew, niece, paternal or maternal deserves its payment more than (the uncle, paternal or maternal aunt, father- payment of anyone else). [Sahih Muslim, in-law, mother-in-law, step-grandfather, Book 6, No. 2554] or step-grandmother provided they do not Thus, scholars deduce from the above have Nisab. According to some narrations, hadith that any missed Zakat must be relatives have more rights on you. paid immediately to the deserving. For more in depth information, additional topics about Zakat, and a functional Zakat Calculator, please visit: www.hidaya.org/zakat www.hidaya.org How to Calculate Your Zakat

Combining acquisitions of $6,000 $6,000 $4,000 the same type: $3,000 $3,000 One year must elapse over the Zakatable Nisab Nisab property in order for Zakat to be required $0 $0 upon it. However, this is subject to Ramadan Ramadan Ramadan Ramadan a qualification in which a person has Figure 1 Nisab of a particular type of Zakatable property (e.g. gold, silver, cash, etc) In this graph, $3,000 is the amount of and during the course of the Zakat year wealth owned in Ramadan. This amount acquires property of the same type exceeds Nisab (calculated according to the Nisab of silver.) During the year from any source whatsoever. Then this it decreases but does not go below newly acquired property is added to the Nisab. In this case, Ramadan will be $6,000 previously existing Zakatable property counted as the beginning of the relevant of the same type, and Zakat is payable lunar year and$ 3Zakat,000 will be due on the on the whole amount at the end of amount of wealth in possession during Nisab that Zakat year - without calculating a next Ramadan,Ra mwhichadan is $6,000. Safar Ramadan Safar separate Zakat year for each separate acquisition. For example, a person has cash of $5,000 and during the course of $6,000 $4,000 the Zakat year receives a further sum$6 ,of000 $10,000$3, 0by00 way of a gift. He must pay $3,000

Zakat on the sum of $15,000 at the endN isab Nisab of that $Zakat0 year. $0 Ramadan Ramadan Ramadan Ramadan The calculator below is based on 2.5% Figure 2 of total net worth available at the end In this graph, $3,000 is the amount of one lunar year. For a detailed Zakat of wealth owned in Ramadan. This Calculator visit: www.hidaya.org/zakat amount exceeds Nisab. During the

year the amount decreases,$ 6,00then0 $6,000 $4,000 Total Gold Value increases to $6,000. Then, wealth $$3,000 $3,000 (excluding jewels) decreases again before increasing Nisab $6,000 Nisab Total Silver Value $0 to $4,000. Despite $0 these fluctuations, $Ramadan Ramadan Ramadan Ramadan (excluding jewels)$3,000 the amounts do not go below Nisab. Hence, the relevant ZakatNisab year will Cash on hand $ begin in Ramadan and Zakat will be Ramadan Safar Ramadan Safar Personal Bank Account(s) $ due on the amount of wealth in the next Ramadan, which is $4,000. Business Bank Account(s) $

Stocks $ $6,000

Mutual Funds $ $3,000 Nisab Business Merchandise Inventory $ Ramadan Safar Ramadan Safar Retirement Plans Figure 3 (401K/IRA/etc.) $ In this graph, $3,000 is the amount of wealth owned in Ramadan, which Real Estate (excluding $ exceeds Nisab. During the year it personal residence) fluctuates - sometimes going below or Accounts Receivable $ above Nisab. The individual’s relevant lunar year however only begins once Other funds (profits,trust $ the wealth goes above Nisab in the accounts, partnerships,etc) month of Safar and remains above that Sub Total $ for one complete year until next Safar. Hence, Zakat will be due in Safar on the Less deductible liabilities $ complete amount, which is $6,000. Total $ Total x 0.025 (Zakat you $ References for this information and more in have to give) depth coverage about Zakat are available on our website: www.hidaya.org/zakat The Purpose of this How Hidaya Distributes Educational Guide: Zakat: The purpose of this guide is to educate Hidaya Foundation collects and distributes Muslims of today’s age about Zakat. Zakat donations for various projects per Given the fact that worldwide poverty is guidelines dictated in Islamic Law and as rampant, combined with the realization instructed by donors. that the majority of Muslims today don’t properly know how to calculate their Zakat Zakat funds are used to support orphans, (especially given the new forms of income widows, poor elderly, families in extreme that were not prevalent in the past), poverty, poor young women for marriage, Hidaya Foundation took the challenge to deserving students, poor medical patients, consult with scholars and come up with and people affected by disaster. this guide to simply explain the concept The projects where Zakat donations are of Zakat and how to calculate it to help utilized are: No Orphan without Education, Muslims fulfill this religious obligation and Job Skills Training, Spread Education, the rights of the poor. Support Hidaya Schools, Hidaya Institute of Farming and Agriculture, Clean Drinking What if Every Muslim Water, Medical Assistance, Medical Camps, Gave Zakat and it was Basic Computer Skills, Network Administration Training, Software Development Training, Distributed Properly? System Administration Training, Animal Farming, Farmer Assistance, Small If Zakat was properly practiced and Businesses for the Poor, Disaster Relief, implemented by those who should give it Marriage Support, Widow/Orphan Support, and those who distribute it, poverty could One Million Meals, and Zakat Distribution. be eliminated from the face of the earth. It is better for an individual to pay his/ An example from history which her Zakat directly to deserving people, demonstrates how implementation of if possible. If however, that is difficult justice in the collection and distribution for them, then they may assign the of Zakat can benefit all of society is from responsibility to a trustworthy individual the of Umar ibn Abdul Aziz. or organization. It is the individual’s During his Caliphate which amazingly responsibility to ask questions from was only for a duration of 2 years and 5 whomever is distributing their Zakat months (717 - 720 A.D.), he made great regarding what kind of people their efforts to organize the government and Zakat is being distributed to, how and ensure justice to the point that his society why they are selected, etc. Remember, enjoyed such a golden period that at the Zakat is obligatory on every Muslim and time of the annual Zakat distribution for if it is given to the wrong person(s), the the poor, Zakat distributors couldn’t even obligation may not be fulfilled. Zakat can find a single poor person in need to accept only be given to people who do not have it. Thus the money was used for helping Nisab and who meet the criteria according neighboring societies, building roads, and to Chapter 9, Verse 60 in the Holy Quran. the overall well being of the community at large. The abundant wealth of Muslims Hidaya Foundation’s at the time and their devotion to properly Mission: give Zakat, combined with the justice in distribution, is an excellent example of To implement educational, environmental, how positive social change is possible social welfare, and health care programs even in such a short period of time. in economically depressed areas of South Asia, West Africa and North America, with Prophet Muhammad (Peace Be focus on projects which promote self- Upon Him) said, “ . . . The poor employment. will never suffer from starvation Contact Us: or lack of clothes unless the rich Hidaya Foundation, 1765 Scott Blvd, Suite neglect their due.” 115, Santa Clara, CA 95050; (866) 244 - [Al-‘Aswat and As-Saghir] 3292 / (866) 2-HIDAYA; www.hidaya.org