How to calculate Zakat: A step-by-step guide for Muslims
Zakat is one of the five pillars of Islam and a fundamental act of worship that purifies wealth and supports those in need. While it’s an obligatory annual charity for capable Muslims, many are still confused about when to pay it and how to calculate Zakat. Let’s break it down and address some common misconceptions:
What is Zakat?
Zakat is an annual charitable obligation for Muslims who meet a minimum wealth threshold, known as the Nisab. It’s not just an act of generosity but a duty that ensures a sustained and fair redistribution of wealth in our societies. The amount to be donated is 2.5% of one’s qualifying wealth.
When should you pay Zakat?
Your Zakat becomes due once a full lunar year (354 or 355 days) has passed since a person’s wealth first reached or exceeded the Nisab threshold, or since their last Zakat donation. Many Muslims choose to pay it every year during Ramadan due to the increased spiritual rewards, but it can be paid at any time of the year, as long as the one-year cycle is followed.
How to calculate Zakat in 3 simple steps
Many Muslims wonder, ‘how to calculate Zakat on savings?’. It’s simple: if your wealth exceeds the Nisab threshold, you must pay 2.5% annually. Here’s how:
1. Check if you qualify
To be eligible to pay Zakat, your wealth must exceed the Nisab threshold. The Nisab is calculated based on the current value of 87.48 grams of gold or 612.36 grams of silver. You don’t have to pay Zakat until your wealth exceeds that value.
2. Identify your Zakatable assets
Zakat is due on certain types of wealth, including:
- Cash savings (in hand, bank accounts, mobile wallets, etc)
- Gold and silver
- Investments (stocks, bonds, cryptocurrencies, rental income, etc)
Non-zakatable assets include personal items like your home, car, furniture, electronics, and daily essentials. It’s important to note that Zakat is due on all savings, regardless of whether the purpose is to save for a home, an education, retirement, etc – as long as it exceeds the Nisab and a full lunar year has passed.
3. Multiply by 2.5% to calculate your Zakat
Once you determine your total Zakatable wealth, multiply it by 2.5% (or divide by 40). For example, if you have AED 100,000 in savings and investments, your Zakat would be:
AED 100,000 × 2.5% = AED 2,500
Where to donate your Zakat in the UAE
In the UAE, it’s important to donate Zakat through official, government-approved channels to ensure your contributions reach those in need effectively and transparently. Here are some of the key organizations across the country:
- Zakat Fund UAE: The official government-run organization for Zakat collection and distribution across the UAE.
- Emirates Red Crescent: One of the largest humanitarian organizations in the UAE, distributing Zakat for emergency relief, healthcare, and community projects.
- Authority of Social Contribution – Ma’an: A government entity in Abu Dhabi that facilitates social initiatives, including Zakat collection and distribution.
- Dar al Ber Society: A prominent charity managing Zakat and other forms of aid in Dubai.
- Mohammed bin Rashid Al Maktoum Humanitarian and Charity Establishment: Provides Zakat-based aid for sustainable development and emergency relief.
- Sharjah Charity International: A trusted organization in Sharjah that manages Zakat contributions for various social causes.
How to send Zakat abroad
Many individuals prefer to send their Zakat to their home countries. Services such as Careem Pay provide a fast and secure way to transfer funds to some of the largest remittance corridors, including India, Pakistan, Egypt, the UK, Europe, and the Philippines.
With Careem Pay, you can send up to AED 150,000 per transaction, ensuring your Zakat reaches those in need almost instantly. To make an international transfer through Careem Pay, simply download or open the Careem app, select ‘Send Money’ on the home screen, and complete the transaction in just a few taps.
Zakat is not just a financial duty – it’s a means of purifying wealth and supporting social equity. By understanding how to calculate and pay it correctly, we can fulfill this important obligation while making a meaningful difference in the lives of others.
