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Zakat Payment of a percentage of a Muslim’s
income/properties to an authorized zakat institution through a zakat collector (‘amil) for distribution to other needed muslim as specified in the syariah
One of the 5 pillars of Islam; obligatory (mandatory)
It is wealth purification, not found in conventional personal financial planning
Zakat is defined as a religious obligation of a
Muslim by setting aside a certain sum of money to be contributed to the receipient
is an act of worship through expenditure of Muslim’s wealth with the ultimate objective to win Allah’s pleasure (Yulyadi Arnabim)
paying a sum of money by a Muslim, after meeting certain condition, to support specific categories of people
Zakat - Wisdom and significance zakat is obligatory alms (sadaqah?) zakat means purification and growth, wealth
purification is fundamental in Islam God will replace and increase wealth that is
purified through zakat real owner of wealth is God, we are only
trustees and must manage wealth according to God’s command where one must set aside for those in need through zakat or sadaqah
zakat and sadaqah help the poor, feed the hungry, remove pain from the deprived brothers
those who refused zakat is a subversive and must be fought or receive capital punishment
Importance of zakat
purifies the wealth and assets of the people a certain percentage of wealth is distributed
immediately in the right manner, because the owner no longer has moral or legal possession of that percentage
if one fails to pay zakat, he is retaining wealth that does not belong to him this is corruption
the unlawfully retained percentage makes the whole lot impure and endangered
Zakat payment Zakat is the amount of money that every
adult, mentally stable, free, and financially able Muslim, male and female, has to pay to support specific categories people
Other condition: a) has met haul ( a time span of one lunar year passes with the money in owner’s control) b) rate of 2.5% (or 1/40)c) reached the nisab (minimum amount)
Zakat – Types and calculation
Zakat on Income There are 3 ways to calculate zakat on
income: 2.5 % of gross income per year After deducting basic expenditure After considering actual expenses to bear
Example:Sources of Income: Salary X
Allowance X
Bonus X
Others X
Total Income (A) XX
Allowable Deductions: Self Y
Spouse Y
Children (RM1,000 X 3 (example) ) Y
Contribution to parents Y
Contribution to EPF (11% of gross income) Y
Deduction to LTH Y
Total Deductions (B) YY
Net Income for Zakat payment: (C) (take A – B) ZZ
Amount exceeded the nisab of RM 6,400 (example)
Zakat payable (C x 2.5%)
Zakat on Savings
Savings is defined as amount of money saved in the savings account, fixed deposits (investment account), current account, ASB and any other types of savings in a bank or other savings institutions.
Zakat payable is based on the lowest balance for a period of one year. The balance amount must met the haul and exceeded the nisab after deducting the interest/dividend except al wadiah account
Example:Date Debit (RM) Credit (RM) Balance (RM)5 Jan 2010 10,000 10,00025 Apr 2010 1,500 8,500
7 Jun 2010 900 7,600
30 Jun 2010 300 (Interest) 7,90015 Aug 2010 700 7,200
30 Sept 2010 1,000 8,200
10 Nov 2010 500 8,70015 Dec 2010 1,000 7,700
The lowest balance in the statement is RM 7,200 and has exceeded the nisab of RM 6,400 for a full one year period. The haul period taken here is from 1st Jan to 31 Dec 2010.Therefore, zakat calculation as follows: Lowest balance = RM 7,200 – 300 (Interest)* = M 6,900Zakat payable = RM 6,900 x 2.5% = RM 172.50 * any income from conventional account has to be deducted
The zakat on savings calculation if depositor has more than one savings account If an individual has more than one account,
he has to add up all the lowest balance of each account. Zakat is payable if the total amount exceeded the nisab amount.
For example:
The lowest balances for the haul period for 3 accounts are as follows:
Example: The lowest balances for the haul period for 3 accounts are as
follows: Account 1: RM 3,000
Account 2: RM 5,500Account 3: RM 2,500
Total amount = RM 11,000
Zakat payable = RM 11,000 x 2.5% = RM 275
# If savings are made in a fixed depository type of accounts, the zakat is payable on the principal amount only.
For example: If principal amount in the Investment Account is RM 15,000, then the zakat payable = RM 15,000 x 2.5% = RM 375
Zakat on Business Two ways of calculating zakat for
business income: Growth Model (Kaedah Model
Berkembang)
Based on owner’s equity on the business entity, sources of financing and profit or losses
Example:Owners’ equity xxx
Long-term liabilities xxx xxxx
Less: Fixed assets xxx
Current assets xxx xxxx
xxxx
Add/less: Profit/loss xx
Business wealth that is subjected to zakat payabale
XX
Working Capital (Kaedah Model Modal Kerja)Based on the value of current assets minus short-term obligations plus adjustments
Zakat on Gold Gold and silver are metals that are subjected to zakat. The obligation to pay
zakat on these two items is justified by the command stated in at-taubah verse 34-35.
Conditions of calculation for zakat on gold:
Determine the ‘uruf (nisab – minimum amount that is subject to zakat). Find the current price of gold per gram. The zakat payable for gold is divided into two situations: Gold owned as women accessories/adornments/decorations This is a situation where gold is purchased by women and used as
accessories on them. Thus zakat is payable if the amount of gold has exceeded the ‘uruf (nisab amount for gold if it is for decorations). If the amount of gold is less than the ‘uruf amount, then the individual is NOT obligated to pay zakat. The ‘uruf is the customary usage in an area and for the state of (example) Selangor the ‘uruf is 800 gram. (For some states the ‘uruf amount can be in ringgit amount). If the amount worn by a woman is more than the ‘uruf than one has to pay zakat.
Example: Zakat payable = total amount of gold owned x current price of gold per
gram x 2.5% Illustration: Zainab is wearing gold accessories in the amount of 1000 gram. The
value of gold is currently RM 120 per gram. In this situation she owns gold amount that is exceeding the minimum amount (‘uruf) of 800 gram.
Therefore, the zakat payable = 1000 gram x RM 120 x 2.5% = RM 3,000
Gold owned as savings This is a situation where gold is owned or used other than as
accessories such as owning gold in the form of currencies, savings, house accessories, minerals. The nisab amount is 85 gram.
Zakat payable = total amount of gold owned x current value of gold per gram x 2.5%
Zakat on Silver Zakat on silver is obligated to be paid
regardless of whether it is worn for accessories or kept as decorations at home, the calculation is based on the total value of silver owned. The nisab for silver is 595 gram.
Zakat payable = total amount of silver owned
x current value of silver per gram x 2.5%
Zakat on share/investment Zakat on shares or investment is divided into 2: If shares are owned until the end of the haul period
and met the nisab, it will be 2.5% of the lowest value.
Zakat payable = no. of shares owned x (current
price or purchased price, whichever is lower) x 2.5 % If shares are traded during the haul period (and met
the nisab), it will be 2.5% of the capital gain. Zakat payable = 2.5% x capital gain (Capital gain = selling price – purchase price
Zakat on Employees Provident Fund (EPF) (KWSP)
Amount of money kept at EPF is subject to zakat because of the concept is similar to savings but the withdrawal is not as easy as the bank’s savings account. Zakat on EPF, however, is only imposed upon complete ownership which when the owner make a withdrawal from EPF. Thus, the zakat payable is based on the amount withdrawn from EPF.
Zakat payable = Amount withdrawn x 2.5 %
Methods to pay Zakat The payment of zakat nowadays is made simple with the advance on technology. One
may not necessary to go to see the ‘amil to deliver the cash but there many options of zakat payment mode as follows:
Salary deductions Salary deductions can be made by giving instruction to employer to deduct a percentage
of your salary monthly (a monthly deduction table is available) and send contribution to the selected collection centre.
At specified collection counters Payment can be made at (i) Post Office counters and (ii) Bank counters – at the appointed
banks Electronic-banking Various e-banking methods are available such as: Internet banking Banks’ ATMs Using credit cards – the acceptable card of selected banks Short Messages Service (SMS) Financial Process Exchange – FPX of selected banks Phone banking Others - Through the mosque system – ‘Kiosk Maju Masjid’