ZAKAT IN ISLAM

1. ZAKAT IN ISLAM Concept and application

3. Definition • Zakat should be regarded more appropriately as a religious levy by which Muslims "make over part of their wealth for the needs of others" • Zakat - "to grow and to purify". • Zakat is neither a tax payment nor a charitable donation. It is a tithe - to "purify" the surplus wealth of the relatively well-to-do by redistribution to the destitute and needy.

4. Dalil of Zakat • Zakat is an important duty for Muslim as mentioned in the Al-Quran: "Keep up prayer and pay zakat". • While prayer is a physical form of worshipping Allah, zakat is a material form. • Zakat is compulsory : • "Take from their wealth charity (alms) to purify them and to cleanse them thereby, and pray for them." [At-Taubah: 103]

5. Dalil in Hadith • In one hadith from Bukhari, Abu Hurairah (r.a.) narrated that the Prophet SAW said: • "Whoever is made wealthy by Almighty Allah and does not pay the zakat of his wealth, then on the Day of Resurrection his wealth will be made like a bald-headed poisonous male snake with two black spots over the eyes. The snake will encircle his neck and bite his cheeks and say, 'I am your wealth, I am your treasure'. "

6. The first Muslim Caliph Abu Bakr As-Siddiq (r.a.), said: • "By Allah (SWT), if they refuse to pay me (even) a bridle which they used to pay the Messenger of Allah (pbuh), then I will fight them because of their refusal." [Muslim] In another hadith by Abu Dawud, the prophet s.w.t. said: • Allah has made zakat obligatory simply to purify your remaining property, and He made inheritances obligatory that they might come to those who survive you.

7. Types of Zakat • 1. Zakat fitrah (al-fitr) - a flat fee or levy imposed on each person. • 2. Zakat from earnings (al-mal) – a religious levy on wealth.

8. Zakat Al Fitr • To contribute a certain amount of staple food or pay an equivalent monetary amount in the month of Ramadan before the Muslim festive celebration or Eid al Fitr (Ariff, 1991). • The zakat al-fitr flat fee is one sa` – a little more than two kilograms of wheat, barley, dates, or rice – or the monetary equivalent (Al Qardawi, 1997).

9. Zakat from earnings • Zakat al-mal or zakat from earningsis levied only on Muslims whose wealth exceeds a threshold called nisab (Kahf, 2005). • Refer to: http://www. ezakat.com.my) • a) Zakat from saving deposit. • Cash deposit in bank is zakatable. The nisab for cash money is based on the nisab for gold i.e. 20 mithqal (85 gram) or silver (595 gram).

10. b) Zakat from gold and silver • The gold and silver are zakatable if they fulfill the nisab rate and one year ownership (haul). • c) Zakat from shares  • The shares that invested in the company is usually paid in cash. • Zakat rate is 2.5% for the lowest value of shares. The shares must be held by the shareholders for one year and exclude any loan for purchasing the shares (if any).

11. Example 1: Shares owned at the end of one full year. Zakat rate is 2.5 % on the lowest cost and the market value. • 200,000 units of shares in Muslim Company x RM 1.00 ( the lowest price) = RM 200,000 • The zakat is: RM 200,000 x 2.5% = RM5,000. • Example 2: Shares purchases within a year. The zakat is calculated based on 2.5 % on the value of shares after deducting the cost of purchasing new shares. • The value of shares – the cost of purchasing new shares • RM500,000 - RM400,000 = RM100,000 • The zakat is: RM100,000 x 2.5 % =RM2,500

12. d) Zakat from agriculture • Zakat on agriculture to owner the staple foods of the particular countries which fulfill the nisab and haul. • Zakatable grains are paddy, dates, corn, wheat etc. • The nisab is 5 ausuk or equivalent to 363 gantang in Malaysia. • The haul is equivalent to one full year ownership. The grains or fruits must be planted by the farmers. • The farmers need to pay the 5% zakat rate on agriculture after grains have been harvested.

13. e) Zakat from livestocks • The livestocks are zakatable when the owners have fulfilled the conditions for nisab and haul. • Zakatable livestocks are sheeps, cows, buffaloes and camels. • These livestocks must be healthy, not criple and must not be used to work in the paddy field or carry the goods.

16. *For every 30 buffaloes, the zakat rate is I male buffalo, aged 1 year or more. • For every 40 buffaloes, the zakat rate is 1 female buffalo, aged 2 years or more. • ** If there are mixed female and male, the owner can choose any buffalo or cow to be paid as zakat.

17. Conditions for zakat • Islam • Wise • Genuinely owned-owner’s asset or asset free of claims by others. • Productive assets -capable of generating profit or revenue and net cash inflows:Cash in hand,Cash at bank,Stocks, shares, bonds, and securities,Inventories of finished goods, Rentals, Net Receivables. • Surplus assets- its value must equal to or above a minimum zakat-able(nisab). • Full year’s possession (Haul) • Fullfil the nisab- a given quantity for the period of an entire year.

18. Recipients of zakat • The hardcore poor or fakir • The needy who need help to supplement their income and life. • The travellers or musafir for religious or spiritual purposes • The reverts or muallaf • The debtors (on the edge of financial disaster) • The slaves who desire for freedom • The amil or zakat collector • The people who strive in the way of Allah (fisabililah)