The Fiqh of Zakat: Benefit, Intention and Calculation

Imagine a beautiful garden with plants and flowers. It is essential to remove weeds for the garden to thrive. This is the original meaning of the word zakat. This is the eighth in a series of articles on Understanding Zakat: Practical Guidance on the Wisdom, Rules, and Etiquette of Giving Zakat.

There cannot be any personal benefit accruing from the Zakat. Zakat cannot be given to parents, spouse, or children. It is not valid to give your Zakat to your parents for a number of reasons. One of these is because wealth and benefit tend to be shared within family. If the parents are needy, there is a separate obligation to support one’s needy parents. 

Parents are obligated already to support their children and that is a separate obligation. In the Hanafi school, you cannot give your wife or your husband your Zakat because of the idea of the benefit not returning to yourself.

Similarly, you cannot give Zakat to your employees instead of their salary for example, because the benefit is accruing to you.

Zakat Requires Intention

Zakat is not a tax, it is an act of worship. You give it not as a burden but rather as an act of worship, seeking Allah, seeking His pleasure, reward, acceptance, favor, and closeness. One should not treat it as a burden but as an opportunity. 

The default in acts of worship is you make the intention at the time of the action. With Zakat, there is leeway in when you make the intention. You can make the intention for Zakat at three levels. You can make the intention of Zakat when you set aside the wealth. Even if then you forget every time to make the intention. So if a person puts aside some funds as his Zakat funds, then you disburse those as different causes and needs are manifest to you, that is fine. Although, it is best to renew the intention each time you are giving.

The Best Intention

The best way to give Zakat is that at point of giving, you make the intention that this is Zakat. In the Hanafi school, you can also make an intention for Zakat after the fact, as long as it is soon after, such that in normal circumstances the person would not have used the money yet. Normally, how long do people take to spend their money? A few days, a week etc. will be fine but you cannot intend it weeks later. However, the best thing is to make the intention when giving. 

In general, when it comes to charity the Prophet (Allah bless him and give him peace) encouraged giving empowering charity. This means that you give in a way that frees the person from need. When someone is in crippling debt, the best charity you can give is a charity that empowers a person to no longer be needy. How that works depends on the circumstances. Sometimes, it may be by giving the person not what is their immediate need, but that which will be a means to them being freed of need. 

Calculation

You consider your full Zakatable wealth, you deduct your debts that are already due or that are upcoming and you minus the next month’s immediate expenses. You can subtract other upcoming expenses within a year if they are already known, but it is better not to subtract them unless they are significant. That is your net Zakatable wealth and it is due when the Zakat year is complete. You consider the lunar year and if you want to consider the solar year, then every year it goes back 12 days technically but every two years, going back a month takes care of it. 

With student loans, if you have a prohibited debt then you should expedite paying that. If you get into a payment plan, so you have now graduated and you are repaying, then you would consider the amount that you are repaying. However, if you are a wealthy student, you have to pay Zakat, there is no student exemption. The debt a student has would be considered like any other debt, if it is a long-term debt you would not exempt it but If it is a long-term debt that now you have immediate payments for, you deduct the upcoming immediate payment, unless you are going to expedite it so you are working full tilt to pay all of it off before you do anything. There is a lot in the Sunna against the accumulation of debt. 

What is Zakat Due on?

Zakat is due on all money that you have, whatever form it is in, whether it is cash in hand or a bank account. Zakat is due on all gold and silver that you possess, whatever form you possess it in. It is due on the weight value of the gold and silver. Zakat is due on investments in a certain way. 

One thing that is tricky and there are other opinions (if find it difficult seek a fatwa from a trusted source) but from what is considered your money is money that you save, including different types of retirement funds. On retirement funds, Zakat is due for every year but is only payable when you have access to the money. That is part of the redistributive function of Zakat.

Zakat makes it difficult to just accumulate huge amounts of wealth. There is a redistributive function to that and it is on wealth. There is a lot of wisdom as to why Zakat is on wealth and not on earnings. 

Trade Goods

On the topic of trade goods, there are a number of ways you can do the accounting of that. Once the goods are ready for sale, Zakat is due on them. If you have a bookstore, Zakat is owed for the books that you own for sale. If you get your books on consignment, you do not own them. One should take the time to learn how to do it right. If new issues arise, confirm those new issues. 

There are a number of ways you could value your trade goods. The balanced position is to do it at the present market value of the item. You could also do it on the likely price you are going to sell. In some industries, there are a lot of items that remain unsold and there are ways you can deal with that.

In the Hanafi school, Zakat is due on all gold and silver that you own by its weight value. The Shafi‘i’s make an exception of what you can wear, even the things that you might just wear on occasions. You are rewarded more for Zakat than for charity.

What Is Exempt

You do not pay Zakat on jewelry other than gold and silver. Nor do you pay Zakat on property or land that you own. However, you do pay Zakat on any earnings from that land. You do not pay Zakat, broadly speaking, on personal belongings. One can go to a jeweler for an estimation of their jewelry. The general principle is when you cannot be certain then you make an estimate.  

Zakat is due on savings even if they are set aside for a need such as saving up to buy a house. However, if you own a house, you do not pay Zakat on it. If someone has properties, if the properties are considered to be a trade good (they buy and sell properties) then if they got it specifically for that intention that is considered a trade good. You should study Zakat in detail if you are in business. 

If you put up your house for sale, your house is not considered a trade good. If someone bought a second property, hoping that in 20 years the prices will increase, but that is not a trade good, that is something that you own. When you put it up for sale, then it would be considered a trade good and Zakat would be due on a yearly basis. If you rent out your house, you have to pay money on the earnings from it.