Pay Zakat On Assets
Pay Zakat On Assets
Calculate Zakat On Assets
Zakat On Assets | Maahad Tahfiz Al Hikmah Shah Alam merupakan Penolong Amil Bertauliah lantikan Lembaga Zakat Selangor (LZS)
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Zakat on Assets
As Muslims, it is our obligation to pay zakat on income or assets. However, while zakat on income is more straightforward for most people, many are still unsure on zakat that have to be paid on assets. In general, an asset is anything that is useful or valuable to a person, while in financial accounting, an asset is any property or ownership of anything that can be converted into cash, such as by selling the asset, or using the asset to create things to be sold. So, what exactly is zakat on assets and what is the difference with zakat on income or zakat on business? Here we explain the definition as well as the types of assets subject to zakat and its calculation.
What Assets Are Subject To Zakat?
There are actually several types of zakat that fall under the category of zakat on assets.. Examples of zakat on assets are as follows:-
- Zakat on gold and silver: Among the many assets on which zakat must be paid, it is not surprising that the ownership of gold and silver falls into this category. It is a valuable element and its value is always increasing. In fact, gold and silver were also once used as currency. In addition, it is also used as an ornament. Thus, valuable assets such as this definitely should be subject to zakat.
- Zakat on income: Paid on all income or salary at the end of the haul (a period of one full year). This income includes salary working for a company, bonuses, savings dividends, grants or gifts, compensation and other sources of income.
- Zakat on savings: Paid based on the amount of savings either in a bank savings account, ASB, ASW and so on. The method of calculating nisab for savings is subject to the total amount of savings at the end of the year or the end of the haul period.
- Zakat on Business: If you do any kind of business activity – whether in the field of manufacturing, supply, agriculture, fishing, mining, or any service, then you have to pay business zakat.
- Zakat on EPF: Don’t worry – the zakat charged on your EPF is not on your EPF savings. Instead, it is zakat that is charged on any withdrawal from your EPF savings. However, there is a difference with the zakat on EPF, which is that it must be paid immediately after the savings are released, instead of waiting for the end of the haul period.
- Zakat on shares: Although it is often not visible on the surface, holding shares also falls under the category of assets and thus is subject to zakat. There are three types of nisab calculation methods for shares, each of which depends on a different situation: equity purchased throughout the year, equity sold, and equity in a private company or cooperative. This equity holding is obtained from the capital market including buying and selling shares, unit trusts (trust funds), exchange traded funds (ETFs – Exchange Traded Funds), commercial real estate shares (REITs – Real Estate Investment Trusts), index funds, bonds, sukuk, and derivatives, and also equity over shares in a company and cooperative.
Apart from the types of assets mentioned above, there are several other types of assets or property that must be paid zakat. This includes zakat for agriculture, livestock and takaful, which is a type of insurance based on Islamic or shariah-compliant principles. However, personal items such as your home, furniture, card, food and clothing that you wear are not included.
How To Pay Zakat On Assets
In general, the calculation for zakat on assets is similar to other zakat, which means you pay 2.5% of the assets that reach the amount of the nisab, i.e. the threshold of wealth based on where you reside. In Malaysia, the nisab threshold is set at around RM21,432 (although it can vary by state). If your assets come up to this amount then you need to pay the zakat on assets. Zakat on assets can be paid to any zakat-collector, but you can also pay online for the convenience.
Who Shall Pay Zakat On Assets
As explained earlier, there are various types of assets that can be subject to zakat. Apart from the types of assets, it is also necessary to look at the conditions to meet the mandatory payment criteria, as follows:-
- Muslim and independent
- The asset to be paid zakat on is under the full ownership of the zakat payer (meaning it is not a shared property and can be used without any hindrance)
- The nisab is sufficient, which is based on the price of gold weighing 85 grams, depending on each state
- The haul period of one year with the asset in the zakat-payer’s possession is reached
If a person meets the above conditions, then it is obligatory upon him or her to pay zakat on assets and savings.
Should Children Pay Zakat on Assets?
What about the children? Are they obligated to pay zakat on assets if the conditions that have been set are enough? According to the Office of the Mufti of the Federal Territory, even if a person is still under the care of a parent or legal guardian, he still has to pay zakat if his property meets the applicable conditions.
We may have heard of children inheriting large sums of money from their family – or perhaps even from an accident insurance payout. So this property has become his property and the guardian needs to be responsible in helping this child pay zakat on his property. As long as the conditions are sufficient including the haul period, the asset owned is fully owned by the child, and the nisab is sufficient, then it is obligatory to pay zakat on assets.
Make Sure You Pay Zakat Property Correctly
The examples above are the types of zakat on assets that should be considered, but it should be remembered that each specific type of zakat has its own calculation method. Islam is beautiful and by its very nature it will not burden the zakat payers. Therefore, may we not be negligent in paying the obligatory zakat on our assets.