Zakat
Zakat is one of the Five Pillars of Islam and refers to a religious obligation to give a set portion of one's wealth to those in need. The word "Zakat" literally means "purification" and is seen as a way to purify one's wealth and soul by giving to those in need. The usual amount is 2.5% of a person's total cumulative wealth in one lunar year.Â
The distribution of Zakat funds helps to address poverty, inequality, and other social issues, thereby contributing to the creation of a more equitable and just society. In this way, Zakat can be seen as the foundation or cornerstone of a welfare state, promoting social justice and helping to build a strong and resilient community.
The conditions for Zakat to be considered compulsory are:Â
In Islamic finance, the following categories of wealth are eligible for Zakat:Â
It is important to note that there is a minimum threshold (nisab) for each category of wealth that must be reached before Zakat becomes compulsory. This threshold varies depending on the school of thought.
Zakat should be distributed to eight specified categories of recipients, known as the "Ashab Al-Maqasid". These include the poor, the destitute, those in debt, travelers, those working in the cause of God, those who are newly converted to Islam, and those who are collecting Zakat.
In conclusion, Zakat is a crucial act of worship and charity, which must be performed by Muslims who meet the necessary conditions.
It is recommended to seek advice from knowledgeable scholars regarding your specific circumstances.
Zakat on jewellery & property
A pension and any property owned for investment purposes should be taken into account. Cattle and crops constitute to agricultural products and as such fall under Zakat, as do gold and silver and ornaments made from gold and silver only, even if the precious metals are used for decorative purposes. The amount of Zakat payable on gold with a weight of over 87.480 grams, whilst Zakat is only payable on silver over 612.35 grams. You can visit a local jeweller to have the value of gold and silver jewellery checked.
As mentioned previously, Zakat is not payable on precious stones like pearls, diamonds, sapphires rubies, corals, chrysotile, or any kind of precious stones unless they are used for trading purposes.
Zakat and shares
Zakat is obligatory on the shares of trading companies, based on the real value if their worth amounts to the Nisab of gold. Zakat has to be paid on both the capital and the profits at the end of the year. The easiest way to calculate Zakat is to find out the monetary value of each type of wealth and then work out 2.5% of the total sum.
Zakat and Loans/Mortgages
When calculating Zakat, mortgage payments for the primary residence can be deducted as a living expense, with up to 12 months’ worth of non-interest portion of upcoming payments being allowed to be deducted by some scholars. However, this only applies if the person feels that their ability to make the payments would be impacted. Most Hanafi scholars believe that only the amounts immediately due or overdue should be deducted from the calculation.
On the other hand, investment properties or rented out properties are considered part of the overall assets, with only the surplus revenue after expenses being subject to Zakat at 2.5%. In most cases, student loans are deducted at source and don't need to be taken into account.
What items are exempt from Zakat?
Your personal home. If you have more than one house, this is the residence you spend the most time in. A car you own for personal use. A debt you are owed, but only if you’re not confident that you will be repaid. Any jewellery that doesn’t contain gold or silver. Furniture and household goods for personal use (things that you’re not planning to sell).
Paying Zakat with Credit Card / PayPal
In most cases, the payment gateway fee is considered as an additional expense and is not considered as part of the Zakat payment. Therefore, it is generally recommended to pay the full amount of Zakat, including the payment gateway fee, in order to fulfill the obligation of Zakat. However, the final decision on whether or not to pay the payment gateway fee is a personal one, and it is recommended to seek guidance from a religious authority or scholar if you have any doubts or concerns.
Zakat for the people affected by natural disastersÂ
It is permissible to give Zakat to the victims of natural disasters according to some Islamic scholars. They consider the victims who are in debt or have lost all their property to be part of the category of al-gharimin, who are qualified to receive Zakat. This is based on the Quranic verse, surah al-Taubah, verse 60, and the Hadith from Qabisah bin Mukhariq al-Hilali. Scholars such as Dr. Yusuf al-Qaradhawi and Dr. Husamuddin bin Musa 'Iffanah also ruled it permissible.
What is Zakat?
Zakat is a religious duty in Islam where a set amount of wealth is given to charity. It is considered a spiritual act of worship and is one of the five pillars of Islam.
How Crescent Relief spends Zakat donations
Crescent Relief is diligent in how it uses zakat funds. Typically, zakat is directed towards supporting the orphans on our waiting list and providing groceries to eligible, low-income families. Any additional allocation of zakat is only made if it is deemed eligible according to Islamic principles.
Can I sponsor an orphan with zakat money?
Yes You Can!
In fact, Orphan Care is the best use of Zakat. Prophet Muhammad, peace and blessings be upon him, said, “The one who cares for an orphan and myself will be together in Paradise like this,” and he held his two fingers together to illustrate.
What are the benefits of Zakat?
Zakat has spiritual and worldly benefits, including promoting honesty, freeing oneself from greed, and practicing self-discipline. Muslims believe that by paying Zakat, they are fulfilling the commandment of Allah and taking care of the needy.
Is Zakat obligatory?
Yes, Zakat is considered an obligation for Muslims who have reached puberty, are of sound mind, and have above the minimum required amount of wealth.
Who has to pay Zakat?
Every Muslim who meets the criteria mentioned above is required to pay Zakat.
How much is required to be given as Zakat?
The usual amount is 2.5% of a person's total cumulative wealth in one lunar year. The value of the minimum required amount of wealth (Nisab) is 87.48 grams of pure gold or 612.36 grams of silver.
Do I have to pay Zakat on the $20,000 profit I received one week before the end of my Zakat year?
Yes, as long as you are in possession of wealth above the Nisab threshold at the beginning and end of the zakat year, then zakat will be due.
Is zakat due if wealth above nisab at start/end of zakat year, even if below nisab during year?
zakat is calculated based on the total wealth held at the beginning and end of the zakat year, even if the wealth fluctuated during that time. As long as the total amount of wealth exceeds the nisab threshold, zakat will be due.
When is Zakat to be paid?
Zakat should be paid once a lunar year (Hawl) has passed from the date that a person's wealth equals or exceeds the Nisab. Many choose to pay Zakat in the month of Ramadan.
Can I pay my Zakat monthly?
it is important to note that traditionally, Zakat is paid annually, in one lump sum. You can choose to pay it monthly if it is more manageable for you, but it is important to pay the full amount due by the end of the year.
What are the 8 categories entitled to receive Zakat?
The 8 categories are the poor, destitute, those who collect Zakat, those to be reconciled, those in debt, those for the cause of Allah, travelers, and slaves.
What constitutes Zakat?Â
Zakat is compulsory on four types of wealth that are the most popular sources of income among people, such as money, trading goods, agricultural products and animals. Money includes financial assets including cash, bonds, stocks, savings, loans given, and funds received.
Can i claim tax deduction on zakat
Yes, you can claim a tax deduction on your zakat donation. Any amount you receive as a tax refund from the government is considered to be your own money.
Superannuation
Superannuation is a retirement savings scheme that is primarily available to citizens of Australia and New Zealand. The scheme provides a means of saving money over time to provide financial support for individuals in retirement. The funds saved in a superannuation account are invested with the aim of generating a return that will provide an income in retirement. Employers are required to make contributions on behalf of employees, and individuals can also make additional contributions voluntarily.Â
The calculation of zakat on Superannuation depends on whether it consists of voluntary or compulsory contributions. Different Islamic organizations and Fatwa councils offer guidance on this issue, usually based on similar cases from around the world and the advice of qualified scholars.
Voluntary Contributions
According to some scholars, it is advised to calculate and pay Zakat annually in order to avoid mistakes and misunderstandings.
Compulsory Contribution
Zakat Eligible Projects
Orphan Leadership Program
Orphan Financial Support Program
Why should you consider giving your Zakat to Crescent Relief?
Crescent Relief is proud to run one of the best orphan programs in the world, with a mission to provide necessary support and care to these vulnerable children. Our team of experienced professionals is dedicated to ensuring that your Zakat funds are used in the most efficient and effective manner possible, making a lasting impact in the lives of orphans.
When you choose to donate your Zakat to Crescent Relief, you can be confident in the transparent and effective use of your funds. Our impactful programs aim to provide long-term solutions to poverty, hunger, and other social issues, and we have a reputation for being a reputable and well-established organization.
At Crescent Relief, we understand the importance of accountability, which is why we have developed an app that provides our donors with progress reports on the sponsored projects and beneficiaries. You can know exactly where your Zakat funds are going and the positive impact it is making in the lives of those in need. Join us in our mission to make a difference in the world, one child at a time.
