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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.
There are actually several types of zakat that fall under the category of zakat on assets.. Examples of zakat on assets are as follows:-
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.
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.
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:-
If a person meets the above conditions, then it is obligatory upon him or her to pay zakat on assets and savings.
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.
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.