SadiaWhat Assets Are Zakatable? A Comprehensive Guide
Zakat is a powerful way to purify wealth and make a positive impact in the community. As Muslims, we are encouraged to give 2.5% of our wealth annually, but it is essential to know which assets are subject to Zakat. Whether you are fulfilling this obligation for the first time or just need some clarity, this blog will help you understand which assets are zakatable so you can give confidently and make your contribution count. At United Muslims, we are here to guide you through the process and ensure your donation is both accurate and meaningful.
What Is Zakat?
Before we explore which assets are zakatable, let’s take a moment to understand why Zakat is such an important act. Zakat is a fundamental act of charity in Islam to ensure wealth is shared fairly within the community. It is not just a donation but a way to purify both the giver and society. By giving 2.5% of your wealth, savings, and investments (if they exceed the Nisab threshold), you are helping to address inequality and support the less fortunate.
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Zakatable Assets: What Do You Need to Consider?
It is important to know which assets are zakatable when determining your Zakat. It helps ensure that you fulfil your religious obligation properly while also contributing to those in need. Here’s a breakdown of the key assets to consider when calculating your Zakat.
Cash and Savings
When it comes to Zakat, cash is one of the most common assets. This includes any money you have in your bank accounts, savings, or investments, whether it is personal savings or funds set aside for future goals. If your savings exceed the Nisab, you are required to pay 2.5% as Zakat. This also applies to money in ISAs, fixed deposits, or similar accounts. In simple terms, any liquid assets, including your salary, are zakatable.
Gold and Silver
Gold and silver hold a special place in Zakat, as they have been used as currency for centuries and still hold global value today. These are zakatable assets, including jewellery, coins, bars, and bullion. If their total value reaches the Nisab, Zakat becomes due. Some scholars make an exception for jewellery that’s worn regularly, like wedding rings, but if it exceeds the Nisab, it’s still subject to Zakat.
The Nisab for Zakat is set at 87.48 grams of gold or 612.36 grams of silver. If the total value of your gold and silver exceeds these amounts, it is time to calculate your Zakat and fulfil this important obligation.
Business Assets
If you own a business, Zakat is due on the value of goods for sale, including stock, raw materials, and finished products. It is also calculated on the net profits as long as the assets have been in your possession for a full lunar year. If you are involved in a partnership or own shares in a company, Zakat will be based on your share of the company’s net assets. Make sure to include all of these when calculating your Zakat to fulfil your responsibility correctly.
Investments & Stocks
Investments like real estate, stocks, bonds, and mutual funds are zakatable. Zakat is based on their current market value, not the purchase price. If these investments have been held for a year and meet the Nisab value, 2.5% of their market value is due. Always calculate the Zakat on the value of the assets at the time of giving.
Livestock & Agriculture
If you own farmland or grow crops, the produce you harvest is subject to Zakat. For agricultural produce, Zakat is typically 5% on crops irrigated naturally and 10% on those watered artificially. Similarly, if you have livestock like cows, sheep, goats, or camels, Zakat is due on them, but only if they are used for trade or breeding. This ensures that those involved in farming or livestock trading fulfil their Zakat obligations in a fair and balanced way.
Pension and Retirement Funds
In the UK, many people save for retirement through pension funds, which might not be accessible right away. However, once your pension reaches the Nisab threshold, you are required to pay Zakat on the current value. Pension funds and retirement savings are not typically zakatable until they are accessible or cashed out. Once you are able to access them and they meet the Nisab, Zakat becomes due.
Debts Owed to You
If someone owes you money and it is expected to be repaid within the year, Zakat is due on that amount. It should be calculated on the total sum that is likely to be collected. However, if the debt is uncertain or unlikely to be repaid, it may not be zakatable.
Rental Properties
If you own property that brings in rental income, Zakat is due on that income. However, if the property is kept for long-term use and isn’t sold or rented out, no Zakat is required unless the property is eventually sold.
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What’s Not Zakatable?
Not all assets are subject to Zakat. It is important to know which items are excluded so you can calculate your Zakat properly. Here’s a closer look at what is not considered for Zakat:
- Personal Items: Items for personal use, such as clothes, furniture, and household goods, are not zakatable. If something is used for your everyday needs or as a personal asset, it is exempt. For example, your mobile phone, clothes, and furniture in your home are not subject to Zakat.
- Your Home: The house you live in is not subject to Zakat, although any rental property you own would be. If you own a second home for rental income or investment purposes, you must pay Zakat on the rental income or the property’s market value if you plan to sell it. But your primary residence is exempt.
- Liabilities: Debts you owe, such as mortgages or loans, can be deducted from your wealth before calculating Zakat. However, the outstanding balance on loans does not reduce the amount of Zakat you owe on your zakatable assets. Only the amount that you are required to pay at the time of calculation can be deducted from your total wealth.
- Unrealised Income: Money that you are yet to receive or income that is speculative, such as the potential profit from future contracts, is not considered zakatable until it is realised.
- Life Insurance and Non-Investment Savings: If you have life insurance that only pays out when you pass away and does not earn any money through investments, the payout is not included in Zakat. Similarly, savings kept in accounts that do not earn interest and are meant for short-term use, like an emergency fund, are not counted for Zakat.
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How to Donate Your Zakat?
Once you have determined which of your assets are zakatable, it is time to give your Zakat. In the UK, one of the simplest ways to donate is through trusted online platforms from reputable charity organisations. United Muslims ensures your Zakat reaches those in need and supports the right causes. We are committed to transparency and making sure your donation creates the greatest impact where it’s needed most.
Donate to Charity and Make a Difference
Zakat is a meaningful way to purify your wealth and contribute to the welfare of society. By understanding what assets are zakatable, you ensure that your contribution is both accurate and impactful. Whether it is cash, gold, property, or livestock, taking the time to calculate Zakat on the right assets helps you fulfil your Islamic duties while making a real impact on the lives of those who need it most. United Muslims made it simple for you to calculate your Zakat with our easy-to-use Zakat calculator.
Donate your Zakat today and help spread kindness and mercy across the world!
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